Points feel like a trick? How do I tell if buying down the rate is worth it?

Are mortgage points worth buying?

You're wondering if paying points to lower your mortgage rate makes financial sense or if lenders are just padding their profits. Points are prepaid interest—each point costs 1% of your loan amount and typically reduces your rate by about 0.25%. Whether buying points saves money depends on how long you plan to stay in the home and your cash situation. Calculate the break-even point by dividing the cost of points by your monthly payment savings. If points cost $3,000 and save you $150 monthly, you break even after 20 months. Points make more sense if you'll stay longer than the break-even period.

Check your Loan Estimate—Section A shows your interest rate with and without points, and Section B shows the point costs. Compare scenarios: no points versus one or two points. Many buyers skip points if they're stretching to cover the down payment or closing costs, since that cash might be better used elsewhere. Share your timeline and financial priorities with the lender and they can run the numbers for different point scenarios.