Should I pay discount points?

Discount points are interest prepaid to your lender at closing in exchange for a lower interest rate on your mortgage. Each discount point is equal to 1% of the loan amount, and is often called “buying down” your rate.

Does paying points make sense for you? The answer depends primarily on how long you plan to stay in your home. First, find out how much lower your monthly payments will be if you pay points. Then, calculate how long it will take for the monthly savings to add up to the cost of the points. If it would take five years to break even and you’re planning to live in your home for ten, paying discount points may be a smart move. Call us for help with a custom calculation.