Quick Answer
If you plan to sell in 5 years, points become a close call, since break-even often lands right around the 5-year mark, and selling before it means you paid for savings you never collected. Lender credits trade the other way: they cut your closing costs now and cost you a slightly higher payment. For shorter planned holds, credits are usually the safer move. Ask Patrick how points when selling soon would work for your loan.
Here is the money problem, Patriot Nation: you plan to sell in five years, and the break-even on points often lands right around that same mark. Buy points and you might just break even; sell a few months early and you lose. The safer play on a five-year horizon is usually lender credits, which put cash in your pocket now. Let me show you why five years is the razor's edge.
The 5-year math on points
On a $300,000 loan at 7%, one point costs $3,000 and reduces the rate to 6.75%, saving about $48 a month. Over 60 months, the savings total $2,880, which is $120 short of the $3,000 cost. You almost break even, but you do not quite get there. That $120 gap is the whole story of a five-year plan: the edge is razor thin.
The meaning: the break-even lands right around the five-year mark, so the plan and the break-even collide.
The money side: $120 short means the points did not pay for themselves, even on a perfect five-year timeline.
The real-world consequence: any sale before month 60 turns the small loss into a bigger one.
The risk assessment
Sell in exactly five years and you lose a small amount. Sell in four and the loss grows. Sell in six and you come out ahead. The risk is that life happens and you sell earlier than planned, and the point cost is gone. The term to know is break-even: the month your savings catch up to your cost, and on a five-year plan you are betting on hitting that month almost to the day.
The meaning: the point purchase is a bet on a timeline, and the timeline is out of your control.
The money side: a job change, a family change, or a market change can move the sale date and flip the math.
The real-world consequence: ask yourself what happens to the math if the plan slips by six months, because that is the real risk.
Why lender credits are safer
Consider taking a slightly higher rate with lender credits instead. On a $300,000 loan, a rate of 7.25% might earn you a lender credit of $3,000, cash that covers closing costs or moving expenses now. The trade is a higher payment for the months you are there, but you collect the benefit immediately instead of betting on a break-even you may never reach.
The meaning: credits pay you now, points pay you later, and on a five-year plan later is a gamble.
The money side: $3,000 at closing beats $120 short at month 60, and the credit is yours regardless of the sale date.
The real-world consequence: the credit protects you when the timeline moves, which is exactly when points hurt.
The real-world consequence
Here is what actually happens: the buyer who buys points and sells in year four watches the savings never catch the cost, while the buyer who took credits banks the cash at closing. If your timeline is genuinely five years or less, credits protect you. If there is a real chance you stay six or seven, the point math starts to turn. Be honest about the timeline, run the numbers, and make it a great one.
The meaning: the decision is a timeline decision, and honesty about the timeline is the whole game.
The money side: every month past the break-even favors points, and every month before it favors credits.
The real-world consequence: run both scenarios with your real numbers before you commit to either.
Ask Patrick about points when selling soon
Get a straight answer on points when selling soon and whether paying points makes sense for your loan.
