People Are Paying Thousands to Lower Their Mortgage Rates—But Some May Wait Years to Break Even

Paying mortgage discount points can lower a homeowner’s interest rate, but the upfront expense may take years to recover. Buyers should calculate their break-even point before spending thousands of dollars at closing. Branislav Nenin/Shutterstock

Would you pay $6,000 upfront to lower your mortgage payment by $100 a month? For some homebuyers, that sounds like an easy decision, especially when elevated interest rates are making homeownership more expensive than expected. But there’s a catch: It could take five years just to recover the money spent securing that lower rate.

This strategy, known as buying mortgage discount points, allows borrowers to pay additional money at closing in exchange for a reduced mortgage interest rate.