PATRICK'S QUICK ANSWER
Points save less in absolute dollars on a 15-year because its rate is already lower, but the lifetime interest saved is larger on a 30-year because the benefit runs longer. Break-even is similar on both, roughly 5 to 6 years. Buy points when you plan to stay past break-even. Ask Patrick how points on 15- vs 30-year mortgages would work for your loan.
Buying points on a 15-year mortgage feels like paying for a discount on a sale that is already happening. The math is different on each term, and knowing which one rewards the points is how you keep thousands in your pocket.
15-year mortgages already have lower rates than 30-year mortgages, so the impact of points is smaller in absolute terms. A rate reduction on a 15-year at 5.75% saves less than the same reduction on a 30-year at 7%.
But the shorter term also means you reach break-even faster, and the total interest saved over the life of the loan is larger on a 30-year because you have more years of benefit.
Points on a 15-year
On a $300,000 15-year at 5.75%, one point, which is $3,000, reduces the rate to about 5.5%, saving roughly $43 a month. The break-even lands around 70 months. The savings per point are smaller because the base rate is lower and the loan amortizes faster, so less interest is at stake.
The meaning: a 15-year already prices in a lower rate, so there is less room for points to do their job.
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.
Points on a 30-year
On a $300,000 30-year at 7%, one point, which is $3,000, reduces the rate to about 6.75%, saving roughly $48 a month. The break-even lands around 63 months. The savings are slightly higher and the loan term is longer, so the total interest saved over the life of the loan from buying points is much larger on a 30-year.
The money consequence: the 30-year gives points more years to work, which is why the lifetime savings dwarf the 15-year's.
The real-world play: if you plan to hold the loan long term, the 30-year is where points earn their keep.
Comparing 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. If you plan to keep the loan for 10 or more years, points on either term can work.
The meaning: break-even tells you when the points pay for themselves. Past that line, every month is savings.
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 one 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 mortgages
Get a straight answer on points on 15- vs 30-year mortgages and whether paying points makes sense for your loan.
