Mortgage Points: Are They Worth It?

Should You Buy Mortgage Points?

For first-time homebuyers, especially in the middle of a PCS, there’s already a lot to manage. Between orders, timelines, packing lists, and housing research, you’re trying to make smart, steady decisions in a high-pressure environment. Then, just as you start feeling confident, your lender brings up something unexpected: mortgage points. Specifically, the option to “buy down” your interest rate by paying more upfront at closing.

At first, it might sound like financial jargon, but mortgage points are simply a way to take more control over your loan. In certain situations, they can help you lower your monthly payment and save significantly over time but in others, they may just add to your costs without much payoff.

This guide breaks down what mortgage points really do, how they work, and when they might make sense.

What Are Mortgage Points?

Mortgage points, often called discount points, are a form of prepaid interest. When you buy a point, you pay a percentage of your loan amount up front to “buy down” your interest rate. The idea is simple: pay more now to save more later.

Each point typically costs about 1% of your total loan. So, if you’re borrowing $500,000, one point will cost you roughly $5,000. In exchange, your lender may lower your interest rate by about 0.25%, although that reduction can vary depending on the lender and market conditions.

Example Breakdown of Mortgage Points:

In this example, buying 1 point for $5,000 drops your monthly principal and interest by $81. That savings can add up—but only if you hold onto the home long enough to make it worthwhile.

Finding the Break-Even Point

The key to deciding whether mortgage points make sense comes down to a simple question: How long will it take for the monthly savings to outweigh the upfront cost?

This is called the break-even point. You find it by dividing the cost of the points by the monthly savings: $5,000 ÷ $81 = approximately 62 months

That’s just over five years. If you plan to live in the home, or hold onto it as a rental, longer than that, buying points could be a smart financial move. If your PCS timeline puts you on the road again in two or three years, you likely won’t see the full benefit.

When Mortgage Points Make Sense

Mortgage points aren’t good or bad, they’re just another option. Whether they work for you depends on your financial goals and how long you’ll own the home.

Scenarios Where Buying Points Pays Off

• You’re planning to stay in the home for at least 5–7 years.
• You want the lowest possible monthly payment.
• You’re using seller concessions to help cover closing costs.
• You expect interest rates to rise and want to lock in something lower now.

Situations Where It Might Not Make Sense

• You’re likely to receive new orders within a few years and plan on selling.
• You need to preserve cash for moving costs or repairs.
• Your lender isn’t offering much of a rate reduction per point.

Why Military Buyers Need to Think Strategically

For military families, buying a home involves more than choosing the right rate. The key question when thinking about mortgage points isn’t just how long will you live in the home, it’s how long will you keep it?

If you plan to stay put for five years or more, buying points may reduce your total interest enough to justify the upfront cost. But if you expect to move in two or three years, and don’t plan to hold onto the property, those savings may not have time to add up.

Still, there’s another layer to consider: refinancing. If interest rates fall in the future and you refinance into a lower rate, any money you spent on points could be lost. You essentially prepaid interest on a loan you no longer have. But if rates rise, or you hold the property as a long-term rental, locking in a lower rate now could boost your monthly cash flow for years.

That’s why it helps to think beyond your current orders. Will this home become part of your investment strategy? Could it be your post-service forever home? Are you open to refinancing if the market shifts?

Think of points as part of a bigger strategy, not just a loan feature. Where you’re headed next and what you plan to do with the home after you leave matters just as much as the rate on closing day.

Bringing It All Together

Mortgage points give you the chance to trade upfront cash for long-term savings. They can be powerful tool, but only when the numbers and the timeline work in your favor. Don’t feel pressured to buy them just because they’re offered. Ask your lender for side-by-side comparisons, and take a few minutes to run the break-even math.

If you’re unsure what fits best with your PCS plans, Combat Properties can help. We work exclusively with military families to demystify the real estate process. Headed to Virginia? We’ll walk with you every step of the way. Moving elsewhere? We’ll connect you with a trusted agent in your new area who understands military life and how to use your VA benefits wisely.

You don’t have to figure it out alone. Ask questions, explore your options, and make the move that fits your future, not just your orders.