When applying for a mortgage, one of the most common questions homebuyers ask is: “Should I pay points to buy down my rate?”
In simple terms, points (or “discount points”) are upfront fees you pay to secure a lower interest rate. Each point typically equals 1% of your loan amount—so on a $1,000,000 loan, one point costs $10,000. Paying points can save you hundreds of dollars a month, but whether it’s worth it depends on how long you keep the loan.
For example, if buying a point saves you $300 per month, it could take around three years to break even. If you stay in the home (and don’t refinance) beyond that point, buying down the rate might make sense. But if you move or refinance within that timeframe, you’ll likely lose money—you’ve essentially “prepaid” interest you never got to use.
Many borrowers also overlook that credit unions and online lenders often advertise lower rates by quietly including points. Always check the fine print! Comparing an “apples-to-apples” quote means knowing both the rate and cost structure behind it.
At the end of the day, this decision depends on your financial goals, available funds, and how long you plan to hold the mortgage. A good lender can model different rate/point combinations and show you exactly where your break-even point lies.
If you’re buying in Southern California or Washington, let’s run the numbers and find out what makes the most sense for your situation.
Key takeaway: Paying points isn’t good or bad—it’s all about timing, math, and your long-term plans.
Reach out anytime to explore your options and see what strategy fits your goals best.