PATRICK'S QUICK ANSWER
Points cost the same 1% of the loan on either term, but they buy a different outcome on a 15-year versus a 30-year. Because a 15-year loan already carries a lower rate and a faster payoff, the break-even on buying points tends to stretch out and the monthly savings are smaller. I weigh your payment goal and how long you will keep the loan. On a 15-year, the lower rate often matters more than buying down further. Ask Patrick how points on 15- vs 30-year loans would work for your loan.
15-year mortgages already carry significantly lower rates than 30-year mortgages. Buying points on a 15-year loan produces smaller absolute savings.
30-year loans have higher base rates, so points have more impact. The break-even math still applies, but the decision framework shifts based on which term you choose. Patrick Kevin Fagan helps San Antonio buyers compare points across different loan terms.
The math on a 15-year
15-year mortgages already have lower base rates, typically 0.5% to 0.75% below 30-year rates. Because the base rate is lower, the dollar savings from buying points are smaller. On a $300,000 15-year at 5.75%, one point, which is $3,000, reduces the rate to about 5.5% and saves roughly $43 a month, with a break-even around 70 months.
The meaning: a 15-year already prices in a lower rate, so there is less room for points to do their job. The savings per point are smaller because the loan amortizes faster and less interest is at stake.
The real-world consequence: the higher monthly payment of a 15-year makes the upfront cost of points harder to absorb, even when the long-term math works.
The math on a 30-year
30-year mortgages have higher base rates, so each point purchase produces larger monthly savings. On a $300,000 30-year at 7%, one point, which is $3,000, reduces the rate to about 6.75% and saves roughly $48 a month, with a break-even around 63 months.
The money consequence: the longer amortization means more total interest savings over the life of the loan. Points on 30-year loans are generally more impactful than on 15-year loans because the benefit runs longer.
The real-world play: if you plan to hold the loan long term, the 30-year is where points earn their keep.
Comparison and Break-Even
The break-even on both loan terms is similar, roughly 5 to 6 years, but the total savings over the full loan life is larger on a 30-year because you have more years of benefit. The right choice depends on your cash flow needs and timeline.
The real-world consequence: if you sell or refinance before break-even, the points were a donation. If you stay past it, they were an investment.
Which term should you buy down
If you are already paying a premium monthly payment for a 15-year, adding points on top can stretch your cash flow thin. I usually recommend points on a 15-year only when the buyer has strong cash reserves and plans to stay long-term. On a 30-year, points make sense when the payment fits and the plan is to stay past break-even.
Make it a great one, Patriot Nation. Run the break-even on the actual loan you are choosing, with the actual rate, and let the months decide. The term you pick matters more than the points you buy.
Ask Patrick about points on 15- vs 30-year loans
Get a straight answer on points on 15- vs 30-year loans and whether paying points makes sense for your loan.
