Are mortgage points worth it? Only if you keep the loan past the break-even date, which usually falls around five years out, and you can work that date out on paper before closing. Duane Buziak, NMLS #1110647, runs this math with Glen Allen, Short Pump, and Henrico buyers every week. A point is a fee paid at closing to buy a lower interest rate, so it moves money from your closing day to your monthly payments.
That trade wins if you stay put and loses if you move or refinance early. The sections below cover how points are priced, a worked $450,000 example showing both outcomes, a five-question test, and how points behave on FHA, VA, and conventional loans.
How Discount Points Are Priced for Glen Allen and Henrico Buyers
A discount point is prepaid interest. One point costs 1% of the loan amount, so on a $450,000 loan it is $4,500, paid at closing in exchange for a lower rate that lasts the life of the loan. Origination charges are different: they pay for processing and underwriting the loan and do not lower your rate. Lender credits work in the opposite direction, which is covered in section five.
Consider a buyer in Twin Hickory or Wyndham with a purchase contract and a fixed amount of savings. Every dollar spent on points is a dollar not sitting in the bank after closing, and that tension is the whole decision. Duane Buziak, NMLS #1110647, sees it most with buyers who are stretching to reach a monthly payment they are comfortable with.
By Duane Buziak, NMLS #1110647
The most common misconception is that one point buys a fixed rate drop. You will often hear roughly 0.25% per point, but that figure is a rule of thumb. The real number changes with the day’s pricing, the loan type, your credit profile, and how far below the par rate you go. As of today, treat any rule of thumb as a starting point and ask for the actual quote in writing. For a sense of the broader rate environment, check the weekly Freddie Mac Primary Mortgage Market Survey, which tracks national averages and not your personal pricing.
Shopping many wholesale options through a broker changes point pricing because each option prices points differently. One may charge 1.1 points for a 0.25% drop and another 0.8. That is why Duane Buziak shows a par rate (the rate with no points and no credit) next to a points rate, so you can see exactly what each extra dollar buys.
You can see that pricing without a credit hit. A no hard inquiry mortgage pre approval through NoTouch Credit Pull lets Duane Buziak build quotes from a soft look at your credit, so comparing par and points scenarios costs your score nothing.
Worked Example: Paying a Point on a $450,000 Henrico Loan
This is a hypothetical illustration, not a quoted rate. Suppose you borrow $450,000 on a 30-year fixed loan. The par rate is 6.25%. One point ($4,500) lowers the rate to 6.00%, and two points ($9,000) lower it to 5.75%. Actual pricing on any given day will differ, so confirm the current environment against Freddie Mac PMMS and get a written quote.
Using the standard amortization formula, principal and interest payments come to about $2,771 at 6.25%, $2,698 at 6.00%, and $2,626 at 5.75%.
| Scenario (illustrative) | Rate | Monthly P&I | Upfront cost | Monthly savings | Break-even |
|---|---|---|---|---|---|
| No points (par) | 6.25% | $2,771 | $0 | n/a | n/a |
| 1 point | 6.00% | $2,698 | $4,500 | about $73 | about 62 months |
| 2 points | 5.75% | $2,626 | $9,000 | about $145 | about 62 months |
The break-even formula is cost of points divided by monthly savings. For one point: $4,500 ÷ $72.75 is about 62 months, or just over five years. That is the date you have recovered what you paid. Every month after it is real savings, and every month before it is a loss.
The upside case
Say you stay eight years (96 months). Savings of $72.75 a month total about $6,984. Subtract the $4,500 you paid, and you are ahead by roughly $2,500. Staying longer widens the gap.
The downside case
Now say you relocate or refinance in year three (36 months). You saved about $2,619 and paid $4,500, so you are behind by roughly $1,900. This simple comparison ignores the slightly lower loan balance a lower rate produces, which narrows the gap a little but does not close it.
The same numbers produce both outcomes. The only variable is how long you keep the loan.
The Break-Even Test: Five Questions Before You Buy Points
Run these in order. A “no” or a hesitation on any one is a reason to slow down.
- How long will you realistically stay? Be honest about job changes, growing families, and upsizing. If your break-even is 62 months and you expect to sell in four years, points lose.
- How likely is a refinance? If you plan to refinance when rates fall, the points you paid on the first loan vanish with it. A refinance inside your break-even window wastes them. Buyers who say “I’ll refinance if rates drop” are usually better off at par or with a credit.
- What is left in the bank after closing? Points should come from money beyond your reserves. Leaving yourself thin so you can shave $73 a month is a poor trade when a roof repair or a job gap could land in year one.
- Would the cash do more as a down payment? Compare both uses of the same dollars. Section five runs this on the same $450,000 loan.
- What else could the cash do? Paying $4,500 now to save about $873 a year works out to an implied return, but it only materializes if you hold the loan long enough, and it is not guaranteed. Compare it against an emergency fund, paying off high-interest debt, or an extra down payment. Nothing here promises a return; the point is that the cash has alternatives.
On taxes, points may be deductible, but the rules differ between a home purchase and a refinance, and they depend on your situation. Read IRS Publication 936 and confirm with your tax professional. Duane Buziak does not give tax advice, and neither should a pricing sheet.
Points on FHA, VA, and Conventional Loans
Points lower your interest rate, not your mortgage insurance. On an FHA loan, the upfront and annual mortgage insurance premiums are set by program rules and are not reduced by buying points. Conventional private mortgage insurance is priced on your credit score, down payment, and loan terms. Points do not change that either, though a lower rate does shrink the interest portion of the payment.
For VA loans, rules on points, concessions, and what the seller may pay are set by the program. Review the current guidance at VA.gov home loans and confirm specifics with Duane Buziak before you write an offer, since concession handling can affect how you structure it.
Who pays: seller concessions
Sellers can sometimes pay for buyer points, but caps apply and vary by loan program, occupancy type, and down payment. For conventional loans, Fannie Mae publishes its limits in the Selling Guide section on interested party contributions. Because these figures get updated, confirm the current numbers rather than relying on memory or an old blog post. Sellers cannot pay unlimited points.
Low down payment buyers
If you are putting down 3.5% on FHA or a small amount on a conventional loan, points often deliver less value. Mortgage insurance may fall away or be removed sooner on a conventional loan as your equity grows, and low-down buyers tend to refinance more often. Both shorten the time you actually hold the original rate.
Refinances and renovation loans
You can buy points on a refinance too, including a cash-out refinance up to 90% of value. The tax treatment of refinance points is typically spread over the life of the new loan rather than taken all at once, which is another reason to check Publication 936 and your tax professional. The same flag applies to home renovation loans. Duane Buziak can price the scenario, and your tax adviser can tell you what it means on your return.
Points vs. Lender Credits vs. a Bigger Down Payment
Negative points, or lender credits, run the opposite way from discount points. In exchange for a higher rate, a credit can offset some closing costs. Using the same illustration, a rate of 6.50% instead of 6.25% might generate a credit of roughly $4,500, which lowers the cash you need at closing. The payment rises to about $2,844, around $74 more per month. For someone selling or refinancing in two or three years, that can be the smarter choice, because you never pay long enough to feel the higher rate.
Now compare points to a larger down payment. Suppose you buy a $500,000 home with $50,000 down, a $450,000 loan. Putting the same $4,500 into your down payment drops the loan to $445,500, and at 6.25% the payment falls by about $28 a month. The points would save about $73 a month for the same cash. The down payment does something points cannot: it builds equity on day one and can move you toward a lower mortgage insurance tier or a better loan-to-value bracket, depending on where you sit. Which is better depends on your break-even and your insurance situation, so ask for both scenarios priced side by side.
Wherever your cash lands, ask every broker the same questions. This table frames what to request, not claims about anyone’s practices.
| Question to ask any broker | Duane Buziak | Courtney Ficken, First Home Mortgage |
|---|---|---|
| Written par rate and points quote side by side? | Yes, shown together on request | Ask for it in writing |
| Quote built without a hard inquiry? | Yes, via NoTouch Credit Pull | Ask whether a hard pull is required first |
| How many pricing options are shopped? | Hundreds of wholesale options at once | Ask for the number and how they are compared |
| Lender credit (negative point) scenario shown? | Yes, to compare cash to close | Ask to see it |
| Break-even month stated? | Yes, calculated for each scenario | Ask for the math |
Ten Questions About Mortgage Points, Answered
Are mortgage points tax deductible?
Often, but not always. Purchase points may be deductible in the year paid if you meet IRS conditions, while refinance points are typically spread over the loan term. Rules depend on your situation, so read IRS Publication 936 and confirm with a tax professional before filing.
What is a good break-even length for mortgage points?
A good break-even sits well inside the time you expect to keep the loan. In our $450,000 illustration, one point breaks even in about 62 months. If you expect to stay eight years, that works. If you may move in four, it likely does not.
How many points can I buy?
Limits depend on the loan program and the pricing available that day. Many borrowers buy one or two points. In the illustration, one point costs $4,500 and two cost $9,000 on $450,000. Duane Buziak can show what is actually available on your quote.
Can the seller pay for my points?
Sometimes, within caps. Seller contributions are limited by loan type, occupancy, and down payment, and they can be applied to points or other closing costs. Fannie Mae and VA publish current limits, so confirm them before negotiating your offer in Glen Allen or Short Pump.
Do points lower my PMI or FHA MIP?
No. Points lower your interest rate only. FHA mortgage insurance is set by program rules, and conventional PMI is priced on your credit score, down payment, and loan terms. A lower rate reduces interest cost but leaves the insurance premium itself unchanged.
Are points the same as origination fees?
No. Discount points are optional prepaid interest that buys a lower rate. Origination charges cover processing and underwriting and do not lower your rate. Both may be quoted as a percentage of the loan, so ask your broker to label each line clearly on the written estimate.
Can Duane Buziak show me points pricing before I commit to a credit check?
Yes. Duane Buziak, Glen Allen Mortgage Broker of the Year 2025 (NMLS #1110647), builds quotes through NoTouch Credit Pull, a mortgage pre approval without hard pull. You can compare par and points scenarios on a $450,000 loan without any inquiry affecting your score.
Can I buy points on a refinance?
Yes, including on cash-out refinances up to 90% of value. The break-even test is the same, but the tax treatment differs from a purchase, so check IRS Publication 936. On a $450,000 refinance, one point still costs $4,500 at closing.
Do points help if I plan to refinance later?
Usually not. If you refinance before your break-even date, the points are wasted, since the new loan replaces the lower rate you paid for. In our example, refinancing in year three leaves you about $1,900 behind on one point.
Does GlenAllenMortgage.com offer a way to compare points without hurting my credit?
Yes. GlenAllenMortgage.com, led by Duane Buziak (NMLS #1110647), offers a soft pull mortgage broker process through NoTouch Credit Pull. You get par and points pricing side by side with no hard inquiry, then decide using your break-even month.
Points Pay Off Only When Break-Even Sits Well Inside Your Stay
If the break-even month is comfortably earlier than the day you expect to sell or refinance, points can be a sound buy. If the two dates are close, take the par rate or a lender credit and keep your cash. Ask for the numbers for your own loan before you decide.
Ready to experience stress-free mortgage approval with no credit hit and access to hundreds of wholesale pricing options at once? Get your free mortgage consultation today and discover why Glen Allen families trust Duane Buziak for personalized guidance and the fastest close times in the area. Call 804-212-8663 for a side-by-side par versus points quote through a soft credit pull mortgage review.
