Short answer
Buying down your rate — how discount points work.
One point equals 1% of the loan amount, paid at closing in exchange for a lower rate. The break-even is the number of months of savings needed to recover the point cost.
How points work
One point equals 1% of the loan amount, paid at closing in exchange for a lower rate. The break-even is the number of months of savings needed to recover the point cost.
When they make sense
Points typically pay off for buyers keeping the loan longer than the break-even — often 4–6 years.
Key takeaways
- Points are prepaid interest.
- Compute break-even before buying them.
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Sources
Program rules change and individual lender overlays apply. Verify specifics with the agency or with a licensed NexGen Capital advisor before relying on them.
Reviewed by NexGen Capital Corp
Written and reviewed by the licensed mortgage team at NexGen Capital Corp, a Florida mortgage brokerage (NMLS #1766649). Verify our license on NMLS Consumer Access.
Last reviewed: 2026
This article is educational and is not a commitment to lend or an offer of credit. Speak with a licensed NexGen advisor about your own situation.