Resources & FAQ's

Should I Buy Points?

Whether or not paying points makes sense for you depends in part on how long you plan to keep the loan. Use a mortgage calculator to help you decide.

1. Calculate the amount of your monthly payment at the interest rate you will be charged if you do not pay points.
2. Calculate the amount of your monthly payment at the lower rate if you do pay points.
3. Deduct the lower payment from the higher payment to find the amount saved each month.
4. Divide the amount charged for points at closing by the monthly amount saved. The result is the number of months you must keep the loan to break-even on paying points.

Break Even Example

• 7.5% Interest, no points = $699.21 monthly payment
• Buying 1 point for $1,000 = monthly payment $690.68
• Monthly Savings = $8.53
• $1000 / $8.53, = 117 months

Your break-even point is 117 months—or nearly ten years to recover the cost of buying the discount point (considering only the simple calculation of those funds at today’s value).Do you plan to stay in the house that long? If not, buying points might not make sense.

Mortgage interest rates are based on Mortgage Backed Securities (MBS) or bonds. If the bonds sell for a high then mortgage interest rates go down. If bonds sell low then mortgage interest rates go up. The answer is pretty simple.

Bonds are affected by many economic forces that influence the demand for bonds. Each week the Fed releases various economic reports that affect bond movement. Foreign markets also can affect the bond market which in return will affect mortgage interest rates. For example, when the Euro Central Bank and Central Bank of New Zealand hiked up their version of the discount rate, many investors sold off their bonds looking for a higher rate of return in their investment. Japan and China hold a good amount of our bonds, so if they decided to sell them to diversify their portfolio that could really affect the bond market and affect mortgage interest rates in a negative way.