How the math works
One point costs 1% of the loan amount. On a $520,000 loan, two points are $10,400. Divide that by the drop in your monthly principal and interest and you get the number of months before the points are paid back. Every month after that is real savings. If you sell or refinance before then, you paid for a discount you did not use.
This calculator also counts the lower balance you build up at the lower rate, which makes points look a little better than the simple division does.
Florida things that shorten your timeline
- Many Florida buyers refinance when rates fall. If you think a refinance is likely in the next few years, points bought now are money you will not get back.
- Insurance renewals and condo assessments can change your monthly cost a lot after closing. Some owners sell sooner than planned because of it.
- Snowbirds and second-home buyers often hold for a set number of seasons. Put that number in the holding period.
Reading your Loan Estimate
Points appear in Section A of the Loan Estimate as a percentage of the loan and a dollar amount. Ask the lender for two quotes on the same day, one with no points and one with points, so the rates are comparable. Rate sheets change daily, so a quote from last week is not a fair comparison.
A seller credit can pay for points. In a slower market, asking the seller to pay for a rate buydown can be worth more to you than the same amount off the price.
Questions
Are points the same as the origination fee?
No. An origination fee pays the lender for making the loan and does not lower your rate. Only discount points buy the rate down.
Should I buy points if I plan to refinance?
Usually not. If you expect to refinance before the break-even month, the points are lost when the loan is paid off.
