If you're thinking about paying points to get a lower rate, I'd want to know how long you expect to keep the loan. I'd also want to see how much cash you'll have left after closing.
Paying points can make sense. I'd recommend it when you'll keep the loan long enough to earn that money back and you won't be cash poor on the day of closing.
Key takeaways
- In my example, one point costs $3,000 on a $300,000 loan and lowers the payment by about $51 a month.
- That point takes 60 monthly payments, five years, to earn back.
- If you might sell or refinance sooner, or the $3,000 would leave you short after closing, I'd keep the cash.
- Ask for two Loan Estimates on the same day, with and without points, and ask whether the seller will pay for the point.
What does a point actually buy?
A point is money you pay at closing to lower your interest rate. One point equals 1% of the loan amount, so on a $300,000 loan it's $3,000.
How much rate a point buys isn't fixed. It depends on the lender, the loan and the day you price it. Lender credits work the other way: you accept a higher rate and pay less at closing.
The CFPB's guidance comes down to time: "Points can be a good choice if you plan to keep your loan for a long time." Read the CFPB's explanation of points and lender credits.
Let's put numbers on one point
Take a $300,000, 30-year fixed loan. Suppose the lender offers 7.25% with no points, or 7.00% if you pay one point.
At 7.25% with no points, principal and interest would be about $2,046.53 a month. At 7.00%, it would be about $1,995.91, and you'd pay $3,000 more at closing.
That's about $50.62 less each month. Divide $3,000 by $50.62 and the simple cash-flow break-even is about 59.3 months. You'd need 60 monthly payments, five years, before the lower payment covers what you paid upfront.
This is an educational example, not a current rate quote or loan offer. These figures are interest rates, not APRs. How much a point lowers your rate varies by lender and loan. The borrower must qualify, and the property must meet applicable lender and appraisal requirements. Payments exclude taxes, insurance, any mortgage insurance and HOA charges.
For context, Freddie Mac's weekly survey had the 30-year fixed averaging 7.24% as of October 29, 2026, down from 7.32% the week before. Freddie Mac says it can't report the fees and points behind that average, so the survey can't tell you what a point buys on your loan. See Freddie Mac's weekly survey.
Will you keep the loan long enough to earn it back?
If you sell or refinance within two years, the point costs you money in this example. Twenty-four lower payments save about $1,215, and the lower rate leaves your balance about $290 smaller. You'd still be roughly $1,500 short of the $3,000 you paid.
If you keep the loan five years, you'd come out about $779 ahead in this example, counting the payment savings and the smaller balance. The longer you keep it after that, the more the point is worth.
So, would you pay $3,000 at closing to save about $51 a month if there's a real chance you'll move or refinance before year five? If rates fall and you refinance early, the point you paid stays with the old loan. Here's how I'd decide whether a refinance pays off.
What does it do to your cash on closing day?
This is where I'd slow down. The $3,000 comes out of the same savings as your down payment and closing costs.
If paying the point would leave you with very little after you get the keys, I'd keep the cash. One repair in the first year can cost more than many months of a $51 savings. That $3,000 can be your emergency reserve, or the money for the repairs you already know the house needs.
If you'll have plenty left after closing and you plan to stay, the point deserves a serious look.
Can the seller pay for the point?
If you're still negotiating, ask whether the seller will give you a credit you can put toward closing costs, including points. You'd get the lower rate without spending your own cash on it. A seller credit has to be written into the contract, and every loan program limits how much the seller can contribute. Here's how I'd compare a seller credit with a price cut.
Compare Loan Estimates before you decide
Ask the same lender for two Loan Estimates on the same day: one with no points and one with the point you're considering. Keep the loan type, term and loan amount the same.
Points show up on page 2 of the Loan Estimate, in Section A, Origination Charges. The CFPB's Loan Estimate explainer shows where to find them and how they affect your cash to close.
Then do the break-even yourself. Divide what the points cost by the monthly savings, and compare the answer with how long you honestly expect to keep the loan.
Points may be deductible as mortgage interest if you itemize and meet the IRS criteria. Read IRS Topic 504 on home mortgage points. I'd check with your tax professional before counting on it.
Ask me to price your loan both ways. I'll put the payment, the money to close and the cash you'd have left side by side, and tell you which one I'd pick for your plans.