A mortgage point costs 1% of the loan amount and typically reduces the rate by 0.25%. On a $400K loan, one point costs $4,000 and saves $58/month — breaking even in 69 months.
Point Analysis
- Cost per point: $4,000 (on $400K loan)
- Rate reduction: 0.25% per point
- Monthly savings: $58 per point
- Break-even: 69 months (5.75 years)
Points make sense if you'll stay in the home longer than the break-even period. With the average homeowner staying 8-10 years, buying 1-2 points is often worthwhile. If you might move within 5 years, skip the points.
