---
title: Are Discount Points Right for You?
description: Discount points can lower buyers’ monthly mortgage payments. By paying a one-time fee, you can reduce your monthly expenses with discount points.
---

[American Pacific Mortgage Blog ](https://www.apmortgage.com/blog)

# [Are Discount Points Right for You?](https://www.apmortgage.com/blog/are-discount-points-right-for-you)

 Written by [American Pacific Mortgage](https://www.apmortgage.com/blog/author/american-pacific-mortgage) | December 30, 2016 at 8:08 PM

If you’re looking to purchase a home, you may have heard that discount points can help lower your interest rate and monthly payments. Lenders offer [discount points](https://www.apmortgage.com/blog/using-discount-points-to-lower-your-interest-rate) through a one-time, upfront fee. The points lower your monthly payment and can help make the mortgage more affordable for the life of the loan. 

Essentially, purchasing points is a long-term savings plan rather than a short-term savings plan because the upfront costs will outweigh the savings if you do not plan to stay in your home for a long time. Find out if discount points are right for you.

## **What will the length of your loan be?**

Will you be doing a 15-year mortgage or a 30-year? Consider what your break-even point will be when purchasing discount points. In other words, how long will it take you to recover the upfront cost you pay?

### Say you have a $200,000 loan:

- 1 discount point generally costs $2,000
- .5 discount point generally costs $1,000 
- .25 discount point generally costs $500

Although it varies, consider that spending $1,000 on discount points could translate into a $16 savings on your monthly mortgage payment. It would take around 63 months to reach that $1,000 point.

With this example, it may make more sense for someone who has a 30-year loan to purchase discount points than someone who is going to do a shorter loan.

## **Do you plan on staying in your home long term?**

For buyers who plan on staying in their home for several years, discount points may be a good option. Again, you will want to look at your break-even point. If you plan to live in your home for only a couple of years, buying a point may not be worth it financially. But if you plan on staying in your home for more than 6 years, buying discount points may work in your favor.

## **Do you think you will refinance your loan in a few years?**

None of us know where the market will go or what the future looks like for interest rates, but if you are fairly certain that you will [refinance](https://www.apmortgage.com/refinancing) your loan in a few years, then you may not reach your break-even point for discount points to be worth your while. However, if you think you will stay with the original loan for several years, then buying discount points might be a good idea.

## **Do you have a large sum of money to put toward closing costs?**

Perhaps you have a large sum of money to use for the [down payment](https://www.apmortgage.com/blog/21-creative-ways-to-save-for-a-down-payment) and toward closing costs. Using that money to buy down the rate will eat up more funds upfront but give you a lower monthly payment for the life of your loan. If you have money to put toward closing costs and want a lower payment, discount points may be right for you.

When thinking about whether or not you should buy discount points make sure to take all the costs into consideration. Our [loan advisors](https://www.apmortgage.com/find-a-loan-advisor-branch) can help you crunch the numbers to determine if discount points fits your mortgage needs.

 

[View full post](https://www.apmortgage.com/blog/are-discount-points-right-for-you)

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