Five questions guide the decision to buy mortgage points. Work through each one in order. The answer reveals whether points make sense for your situation.
Ask yourself: 1) How long will you stay in the home? 2) Can you afford the upfront cost? 3) Does the break-even period fit your timeline? 4) Are there better uses for your cash? 5) Are rates high enough that points produce meaningful savings? Patrick Kevin Fagan walks each client through this framework.
1. How Long Will You Stay in the Home?
This is the most important question. If you plan to stay less than 3 years, points almost never make sense. At 3-5 years, it is borderline. Over 5 years, points become increasingly attractive. Your expected time in the home determines whether you will reach the break-even point. Patrick Kevin Fagan helps San Antonio buyers realistically assess their expected timeline.
2. Can You Afford the Upfront Cost?
Points require cash at closing. On a $300,000 loan, 1 point costs $3,000. If paying points would deplete your emergency fund or prevent you from handling other closing costs, skip the points. Your financial stability comes first. Patrick Kevin Fagan helps clients in San Antonio assess their cash position before recommending point purchases.
3. Does the Break-Even Fit Your Timeline?
Calculate the break-even: divide the point cost by the monthly savings. If 1 point costs $3,000 and saves $75 per month, break-even is 40 months. If you plan to stay 60 months, you save for 20 months after break-even. The longer past break-even you stay, the more value points provide. Patrick Kevin Fagan calculates break-even for clients throughout greater San Antonio.
4. Are There Better Uses for Your Cash?
Compare paying points against other uses of your cash: a larger down payment, paying off high-interest debt, investing in renovations, or keeping cash for emergencies. Points provide a guaranteed return through lower payments. But other uses may provide higher returns or more flexibility. Patrick Kevin Fagan helps San Antonio buyers evaluate opportunity costs.
5. Are Rates High Enough?
Points produce larger savings when base rates are high. At 7%, buying down to 6.75% saves more than buying down from 5% to 4.75%. The decision is more compelling in high-rate environments. If rates are near historic lows, points may not produce enough savings to justify the upfront cost. Call 210-317-6514 to run through the full decision framework with Patrick.
