1.5 Mortgage Points Costs $6,750 Upfront — Here's Exactly When It Pays Off
We ran 1.5 discount points on a $450,000 loan at a 6.75% base rate through the calculator. The upfront cost: $6,750. The payoff: roughly a 0.375% rate reduction, worth real monthly savings — but only if you keep the loan long enough to recoup that upfront cost. For this scenario, the breakeven lands comfortably under 12 years. For a buyer confident they’ll hold the loan that long, the points are a clear win. For a buyer who might sell or refinance sooner, the same purchase is simply money left on the table.
The tradeoff, in one table
| Value | |
|---|---|
| Loan amount | $450,000 |
| Points purchased | 1.5 |
| Points cost | $6,750 |
| Base rate | 6.75% |
| Rate after buydown | ~6.375% |
| Breakeven | Well under 12 years |
The core question isn’t “do points save money” — mechanically, they almost always do, as long as the rate reduction is real. The real question is whether you’re confident enough in your holding period to bet the upfront cost on it. A points purchase is a fixed cost recouped gradually; anything that ends the loan early (a sale, a refinance, an unexpected move) caps your realized savings at whatever accumulated before that point, and if it happens before breakeven, you’re out real money.
Why “just buy the points, it saves money eventually” is incomplete advice
Points calculators that only show the breakeven month without asking how confident you are in your holding period miss the actual decision. Two buyers with identical loan terms can have completely different correct answers depending on personal circumstances — job stability, family plans, how firmly they’ve settled on the neighborhood. The math is simple; the honest assessment of your own holding period is where the real judgment call lives.
Where this framework doesn’t apply
- You might sell or refinance before the breakeven. Career uncertainty, a family that might outgrow the home, or general uncertainty about how long you’ll stay all argue for skipping points regardless of how favorable the breakeven math looks on paper.
- You’d rather have the cash for other uses. The points money could go toward a larger down payment instead (which also reduces the loan amount and possibly PMI), an emergency fund, or an investment with its own expected return — compare against your specific alternative, not against nothing.
- You expect to refinance opportunistically if rates fall. If that’s part of your plan regardless of what you do now, the points cost is stranded the moment you refinance away — that expectation itself argues against buying points today.
- Your lender’s rate reduction per point is below-average. Not all lenders price points the same. Get the actual number from your loan estimate rather than assuming a standard 0.25% benchmark applies to your specific loan.
What to actually do
- Get your lender’s actual loan estimate showing the real rate reduction per point for your specific loan.
- Give yourself an honest, conservative estimate of your holding period — not the full loan term by default.
- If the breakeven comfortably clears your expected holding period, buying points is a reasonable, low-risk move.
- If it’s close or your plans are uncertain, keep the cash instead — a bigger down payment or a stronger emergency fund has value points buydown can’t match if your circumstances change.
- Re-run the comparison any time your plans shift (a new job possibility, a growing family) — the right answer depends entirely on the holding-period estimate, which can change.
For the baseline mortgage math this decision builds on, see how much a 1% rate change actually costs per month.
Open the Mortgage Points Buydown Calculator → and run your own loan amount, rate, and points quote.