What Are Mortgage Points?
Explanation of how mortgage points reduce monthly payments and lifetime interest costs with practical breakeven analysis.
By Eric Zunkley•
Mortgage points are a way to reduce your interest rate by paying an upfront fee at closing.
One point typically costs 1% of your loan amount and reduces your rate by 0.25%. So on a $500,000 loan, one point costs $5,000 and saves about 0.25% on your rate.
The breakeven point depends on how long you plan to keep the property. If you plan to stay for 7+ years, buying points often makes financial sense.
Every borrower's situation is different. Run the numbers with your lender to determine if mortgage points make sense for you.