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Mortgage Points Explained: When Paying More Up Front Can Make Sense
Mortgage points are not automatically good or bad. They are an up-front tradeoff: pay more now to reduce the rate and potentially save later.
Key takeaways
- The breakeven period is the first calculation that matters.
- Points work best when you are likely to keep the loan long enough.
- Closing cash strain can outweigh a rate improvement.
Calculate the breakeven, then check the life plan
If the lower rate saves $70 a month and the points cost $2,100, the simple breakeven is around 30 months. That matters only if you are likely to keep the mortgage beyond that point.
Refinance plans, mobility, and risk tolerance all affect whether the math holds in real life.