Points & Credits
Are Mortgage Points Worth It?
Mortgage points allow borrowers to reduce their interest rate by paying an upfront fee at closing. Whether that tradeoff makes financial sense depends entirely on the breakeven timeline.
What Mortgage Points Are
Mortgage points are upfront fees paid to reduce the interest rate on a loan. One point equals one percent of the loan amount.
How Points Affect Your Loan
Paying points lowers the interest rate but increases closing costs.
- Loan amount: $400,000
- 1 point cost: $4,000
Breakeven Timeline
The breakeven timeline measures how long it takes monthly savings from a lower rate to offset the upfront cost of points.
If the breakeven exceeds the expected time in the loan, the points may not make financial sense.
Why This Matters
Many borrowers pay points without calculating breakeven.
The KnowBeforeYouClose audit calculates this automatically.
Run the audit on your Loan Estimate.
The KnowBeforeYouClose audit analyzes the structure of your mortgage using the same numbers disclosed in your Loan Estimate.
Run Free Audit →