The most critical factor in deciding to buy points is your —the time it takes for your monthly interest savings to equal the upfront cost of the points.
: Each point usually reduces your interest rate by 0.25 percentage points (e.g., from 7.00% to 6.75%). buying points on mortgage
Cost of Points / Monthly Savings = Months to Break Even Scenario (on $300,000 Loan) Without Points With 1 Point ($3,000) Interest Rate Monthly Payment (P&I) Monthly Savings Break-Even Period 60 Months (5 Years) Calculated based on standard industry examples. When It Makes Financial Sense The most critical factor in deciding to buy
: To deduct points, your total itemized deductions must exceed the standard deduction ($15,750 for single filers; $31,500 for married filing jointly in 2025). When It Makes Financial Sense : To deduct
: If the break-even is long (e.g., 8+ years), you might see a better return by investing that cash in a high-yield savings account or a 401(k). Key Considerations for 2026
Buying points is essentially a long-term investment. It is generally a good idea if:
: You plan to stay in the home well past the break-even point, typically more than 5–7 years.