Rates
Should you buy points to lower your rate?
Paying for points lowers your rate — but only pays off if you keep the loan long enough. Here's how to run the break-even.
'Buying points' means paying money up front at closing to lower your interest rate. One point costs 1% of your loan amount and typically shaves a fraction off your rate. Whether it's worth it comes down to time.
The break-even question
Points lower your monthly payment, so the math is: how long until the monthly savings repay the upfront cost? If a point costs $3,000 and saves you $60 a month, you break even in about 50 months. Keep the loan past that and you come out ahead.
When points make sense — and when they don't
If you plan to stay in the home well beyond your break-even and have the cash to spare, points can be a smart, guaranteed return. If you might move or refinance sooner, that upfront money is better kept in your pocket.
Your loan officer can show you the payment with and without points side by side, so you can decide with the actual numbers in front of you.