Mortgage Rates Just Hit a 15-Month High. Are Points Worth It?

The average 30-year fixed mortgage rate rose for the third straight week and hit 6.76% on Thursday, its highest level in more than 15 months, according to Realtor.com. That brings back a question many buyers asked a couple of years ago: is it worth paying thousands of dollars upfront to buy your rate down?

Realtor.com's own data gives a clear answer to how buyers have historically responded to rate spikes. In 2021, when rates sat near historic lows, only 34% of 30-year purchase loans carried discount points. By 2023, as rates surged, that number jumped to 60%. "The data provides strong evidence that rate level is the primary driver of the points-buying decision," says Jiayi Xu, senior economist at Realtor.com.

What a point actually buys you

One point generally costs 1% of your loan amount and lowers your rate by about 0.25%, though the exact terms vary by lender. It's not a discount; it's prepaid interest. You're handing the lender money now in exchange for a smaller payment every month after.

The math behind the decision

Here's the example Realtor.com walks through: a $300,000, 30-year loan at 6.5%. Paying 2 points, $6,000 upfront, drops the rate to 6% and the monthly principal-and-interest payment from about $1,896 to $1,799. That's roughly $98 a month in savings. At that pace, it takes about 61 months, just over 5 years, before the monthly savings actually recover the $6,000 you paid. Only after that point are you ahead.

The catch: points are attached to the loan, not the house

Homeowners today stay in their homes a median of 8.5 years, a 25-year high, so five years might sound easy to clear. But that's the wrong number to look at. Points pay off based on how long you keep that specific mortgage, not how long you keep the house. Between 1994 and early 2020, borrowers refinanced after a median of just 3.6 years, well short of the break-even point in the example above. If rates drop enough in a few years to make refinancing worth it, the original loan, and the points you paid on it, disappears before it ever paid you back.

What else that money could do

Ben Mizes, president of Clever Real Estate, points out that cash-constrained buyers need to think about more than the break-even math. "First-time and cash-constrained buyers should keep some money to cover closing costs, make repairs, and for emergencies," he says. That's not a small concern either: 41% of first-time homeowners said they spent more than expected on maintenance, improvements, and emergency repairs after closing.

None of this means points are a bad idea. For a buyer who's confident they'll hold the loan for years, they can genuinely save real money. But the decision depends entirely on your specific numbers, your loan amount, your rate options, and how long you actually plan to keep that mortgage. If you're weighing whether points make sense for your situation, I'm happy to run the actual numbers with you before you decide.