Buy Down Points Mortgage • Verified Source

Buying down mortgage points (also known as ) is a strategy where you pay an upfront fee at closing to lower your interest rate for the life of the loan. It is essentially prepaid interest ; one point typically costs 1% of the total loan amount and reduces your rate by approximately 0.25% . When It Is Worth It

Example : Paying $4,000 to save $100/month means your break-even point is (3.3 years). Comparison Table (Sample $500,000 Loan) Interest Rate Upfront Fee Monthly Payment Monthly Savings Break-Even Time ~60 months ~60 months Data based on estimates from PenFed Credit Union . What Are Mortgage Points And How Do They Work? - Bankrate buy down points mortgage

: Using your last bit of cash for points instead of keeping it as an emergency fund can be risky. How to Calculate the Break-Even Point Buying down mortgage points (also known as )

: It is a strong financial move if you plan to keep the loan long enough to reach the "break-even point" . This is when the monthly savings from the lower rate finally exceed the initial cost of the points. How to Calculate the Break-Even Point : It

: If you plan to sell the home or refinance within a few years, you likely won't reach the break-even point, meaning you’ve wasted the upfront fee.

: Find the difference between the monthly payment at the higher rate and the lower rate.

: In 2025 and 2026, with elevated rates, securing even a slightly lower rate can lead to massive interest savings over 15 to 30 years.