What is a point?
One mortgage point generally represents 1% of the loan amount, but the rate reduction received for a given cost varies with market and lender pricing.
Compare quotes on the same day
Rate markets move. To evaluate points, request matched quotes with the same loan amount, lock period and assumptions.
Simple break-even example
If points cost $6,000 and reduce the monthly payment by $100, the simple break-even is 60 months. That does not include opportunity cost or tax effects, but it gives a clear starting point.
Holding period is the key uncertainty
If you sell or refinance before break-even, the upfront cost may not be recovered through payment savings.
Do not ignore cash reserves
Even if points have a favorable long-term break-even, using cash for points can reduce reserves or down payment flexibility.
FAQ
Are points always worth it when rates are high?
No. The value depends on cost, rate reduction and holding period.
Can the seller pay points?
Potentially, subject to loan-program and concession limits.
Should I choose the lowest advertised rate?
Only after comparing the upfront cost and assumptions behind it.
Financial note: Mortgage pricing changes frequently. Compare current written Loan Estimates and ask the lender to show point/no-point alternatives.
