Quick Answer
If you plan to refinance within 3 years, buying points almost never makes sense. On a $300K loan, one point costs about $3,000 and saves roughly $48 a month, which is only about $1,728 in three years. You lose the difference every time you refinance early. When the plan is a short-term loan, lender credits or a no-point rate win. Ask Patrick how points when refinancing soon would work for your loan.
Here is the money problem, Patriot Nation: you expect to refinance within three years, and the lender is offering points that lower your rate. Buying points on a loan you plan to replace is like paying full price for a ticket you will use twice. The math almost never works, and the smarter move is usually lender credits or the no-point rate. Let me show you the numbers.
The 3-year math on points
On a $300,000 loan, one point costs $3,000 and saves roughly $48 a month. Over 36 months, that is $1,728 in savings, which is $1,272 less than the point cost. You lose money on every refinance that lands before the break-even, and with a three-year plan, the break-even is not even close.
The meaning: the break-even on points typically runs five years or more, so a three-year plan never reaches it.
The money side: $1,272 is the gap between what the points save and what they cost in three years, and it is gone.
The real-world consequence: the refinance replaces the loan, and the point cost does not transfer to the new one.
Why lender credits usually win
Lender credits work in reverse: you accept a slightly higher rate and the lender gives you cash at closing. If you plan to refinance in three years, that cash now more than offsets the temporary higher payment, and you walk into the refinance without sunk costs. The term to know is credit: money applied to your closing costs in exchange for a higher rate.
The meaning: credits move cash from the payment into your pocket at closing, the exact opposite of points.
The money side: the credit reduces your cash to close dollar for dollar, which can be the difference between closing and waiting.
The real-world consequence: on a short horizon, cash today beats a lower payment you will never enjoy.
When points might still work
Points only make sense with a short refinance plan in narrow cases, like an exceptionally long rate lock where you are paying to protect against rates rising before closing. For the overwhelming majority of borrowers planning a near-term refinance, the point cost is money you will not see again. Skip the points and keep the cash.
The meaning: the only version of this plan where points help is when the point cost buys protection, not savings.
The money side: a long lock protects your rate while the market moves, and the point cost is the price of that protection.
The real-world consequence: most borrowers do not need that protection, so most should skip the points.
The real-world consequence
Here is what actually happens: you pay $3,000 for points, rates drop in year two, you refinance, and the $3,000 is gone while the new loan starts from scratch. The buyers who handle this well treat the refinance plan as part of the loan decision from day one. Match the upfront cost to how long you will actually keep the loan, and make it a great one.
The meaning: the loan decision and the refinance plan are one decision, not two.
The money side: every month before the break-even is a loss, and a refinance locks that loss in.
The real-world consequence: be honest about the refinance window, because the math punishes wishful timelines.
Ask Patrick about points when refinancing soon
Get a straight answer on points when refinancing soon and whether paying points makes sense for your loan.
