From the RatesQ team · Sample question

Is paying points worth it if I may refinance later?

This educational scenario and its sample explanations are not posts from real users.

Lender A is offering 6.75% with no points. Lender B is offering 6.375% but wants 1.5 points (1.5% of the loan amount = about $4,500). I plan to stay in the house long term but who knows what rates will do. How do I decide if paying points makes sense?

Quick Summary

  1. Discount points are upfront charges exchanged for a different interest rate.
  2. Compare the additional upfront cost with interest savings over your timeline.
  3. Refinancing or selling before the crossover changes the result.

Sample explanations

From the RatesQ team

Break-even math: if 1.5 points costs $4,500 and saves you $80/month, you break even in about 56 months (4.7 years). If you're confident you'll stay 7+ years without refinancing, the points probably make sense. But 'long term' plans change. If rates drop in 2–3 years and you refinance, you'd still be underwater on those points.

From the RatesQ team

The math is right but there's a nuance: those points are pre-paid interest and generally tax-deductible in the year paid (check with your tax advisor on this). That can shift the break-even shorter. Also think about opportunity cost — $4,500 invested instead of paid upfront. Personally for 1.5 points on a rate difference of 0.375%, I'd want the break-even under 4 years for it to feel compelling. Ask the lender to model the total interest cost at year 5 and year 10 for both scenarios.