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Ken Lam Realty · Tools

Are discount points worth it?

Pay more at closing for a lower rate. See the month you get your money back.

$
%
pts
%
yrs
$
You break even in
0 months
Monthly savings added up What you paid for points
New rate (estimate)0%
Cost of points $0
Seller pays$0
You pay out of pocket$0
Payment with 0 points (P&I)$0
Payment with points$0
Monthly savings$0
Net savings $0
The seller credit is more than the points cost. The extra can often go to other closing costs, not cash back. Ask your lender.
Points on a purchase loan may be tax-deductible. Refinance points usually spread over the loan. Ask your CPA.
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Next steps

  1. Ask 2–3 lenders for a Loan Estimate on the same day: one with 0 points, one with 1 point.
  2. Check page 2, Section A. That's where points show up. Put the real rate drop in the box above.
  3. Comparing two full offers? Use T32.
  4. Think you'll refinance when rates drop? Run T31 first. Refinancing before break-even wastes the points.

Many people get this wrong: a lender credit isn't free money. It's points in reverse. You get cash at closing and pay a higher rate every month. Points: pay now, lower rate.