Are mortgage points worth it?

How points work

Buying discount points means paying interest in advance to secure a lower rate for the life of the loan.

• Cost: each point is 1% of the loan amount — $2,500 on a $250,000 loan
• Benefit: usually shaves roughly a quarter percent off the rate, though the exact trade varies by lender and market
• When paid: at closing, in cash or through seller or lender credits

Because they're paid upfront, points add to your closing costs.

Calculating your break-even

The math is simple: divide the cost of the points by the monthly payment savings to find how many months until you recoup the expense.

Keep the loan longer than that and you profit; sell or refinance sooner and you've overpaid. In a market where Michigan buyers often move or refinance within a few years, that break-even deserves a hard look.

When points make sense

• Good fit: borrowers confident they'll hold the loan long-term with cash to spare beyond down payment and reserves
• Poor fit: if paying for points would drain your emergency fund
• Poor fit: if you expect to refinance when rates fall

If a seller is offering concessions, using them to buy points can occasionally beat taking a price cut — worth running both ways with your lender.

The temporary alternative: a 2-1 buydown

A 2-1 buydown cuts your rate temporarily, not permanently: 2 points below the note rate in year one, 1 point below in year two, then the full rate from year three. The cost, about 2–3% of the loan, is usually paid by the seller or builder.

That flips the points math. A buydown front-loads its savings into two years, so it suits a buyer who expects to refinance when rates fall: near-term relief without paying for a permanent cut you'd lose on the refi. Permanent points win only if you keep the rate for years.

Calculate your exact break-even in the mortgage points calculator.