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Points & Credits: Should you buy down your mortgage rate?

When you get a mortgage, you can often choose to pay more upfront for a lower rate, or take a higher rate in exchange for help with your costs. These choices are called points and credits. This page explains both in plain language so you can decide what fits your plan.

The whole idea comes down to a trade: cash now vs savings later. Let's break it down.

A balance scale weighing a house against percentages, illustrating points and credits
Quick answer

Discount points are an upfront fee you pay to lower your interest rate — one point usually costs 1% of the loan amount. A lender credit is the opposite: you accept a slightly higher rate and the lender helps pay your closing costs. Points make sense if you keep the loan long enough to reach your break-even point. Credits help if you want to keep cash now.

What this means

Think of your rate and your upfront cash as a seesaw:

Neither is "better." It depends on how long you will keep the loan and how much cash you have now.

Pay points → more cash upfront → lower rate → lower monthly payment.
Take a credit → higher rate → less cash upfront → higher monthly payment.
Step by step

Buying points (lowering your rate)

1
You pay an upfront fee (often 1% of the loan per point).
2
Your rate drops by some amount.
3
Your monthly payment goes down.
4
You "earn back" the upfront cost over time through lower payments.
Step by step

Taking a lender credit (raising your rate)

1
You accept a slightly higher rate.
2
The lender gives you a credit toward closing costs.
3
You bring less cash to closing.
4
You pay a bit more each month.

The break-even point

The key number for points is the break-even point — how long it takes for your monthly savings to cover the upfront cost.

ItemExample
Cost of points$6,000
Monthly savings$150
Break-even40 months (about 3.3 years)

If you keep the loan longer than the break-even point, points pay off. If you sell or refinance sooner, they may not. This is a rounded example, not a quote.

Requirements (at a glance)

ChoiceWhat you need
Buy pointsExtra cash at closing
Take a creditComfort with a slightly higher payment
EitherA clear sense of how long you will keep the loan

Benefits

Points:
Lower rate and payment.
Long-term savings if you stay.
Less interest paid over time.
Credits:
Less cash needed at closing.
Helpful if money is tight now.
Useful if you may refinance or move soon.

Potential drawbacks (the honest part)

Points:
Cost cash upfront.
Wasted if you move or refinance before break-even.
Credits:
Higher rate and payment.
More interest over time if you keep the loan long.

Points vs temporary buydowns

Points lower your rate for the whole loan. A temporary buydown (like a 2-1) lowers your rate only for the first year or two, then it returns to normal. They are different tools. See Temporary Buydowns (2-1, 1-0).

Real-world California examples

What it looks like in practice

Example 1 — Long stay, points pay off in Fresno.
Example 1 — Long stay, points pay off in Fresno.

Carlos plans to stay 15 years. He pays points to lower his rate, and his break-even is under 4 years, so he saves a lot over time.

Example 2 — Short stay, credit fits in San Diego.
Example 2 — Short stay, credit fits in San Diego.

Aisha thinks she will move in about four years. She takes a lender credit to lower her closing costs, accepting a slightly higher rate she will not keep long.

Example 3 — Tight cash in Sacramento.
Example 3 — Tight cash in Sacramento.

The Lee family is short on cash at closing. A lender credit helps them cover costs now, and they plan to refinance later if rates drop.

Examples are for learning only. Your best choice depends on your cash, plans, and the market.

Common mistakes

1Buying points without checking break-even. If you move soon, they may not pay off.
2Confusing points with a temporary buydown. They work differently.
3Ignoring the APR. Points lower the rate but change the APR. See Rate vs APR.
4Taking a credit and forgetting the higher payment. It costs more monthly.
5Not comparing both. Always weigh points vs credits for your timeline.
6Using cash you need for emergencies. Keep a cushion.
Good questions

Frequently asked questions

Upfront fees you pay to lower your interest rate. One point usually costs 1% of the loan.

Next steps

Decide what fits your plan

Decide based on two things: how much cash you have now, and how long you will keep the loan. Then choose points, a credit, or neither. EZ Online Mortgage can show you the break-even math so you can decide if buying down your rate is worth it.

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Keep learning

This page is for education only. It is not a loan offer or a promise of rates, savings, or terms. Your results depend on your individual circumstances and market conditions. Equal Housing Opportunity · NMLS #362311 · CA DRE #01871814.

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