Should I buy points to lower my rate?
Answered by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
It depends on how long you'll keep the loan. Buying points lowers your rate and payment but costs cash up front (one point is 1% of the loan for about a 0.25% rate cut). You profit only if you keep the loan past the break-even.
If you might sell or refinance soon, points usually aren't worth it. We calculate your break-even so you pay points only when the math favors it.
It depends on your timeline
Buying points makes sense when you plan to keep the loan long enough to recover the upfront cost. Each point costs 1% of your loan and lowers your rate by roughly a quarter percent.
The longer you hold the loan, the more the lower payment pays back the points.
Finding your break-even
Divide the point cost by your monthly savings to find your break-even in months. Stay past that point and the points pay off; sell or refinance sooner and they do not.
We run this math for every client. Apply now and we will show whether points are worth it for you.