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Buying mortgage discount points vs larger down payment?

Buying a home. I have enough cash on hand to basically purchase the home outright but with rates so low I was going to put the 20% down and take out a mortgage for the rest. I know the basics about points. All else remaining equal if I stay in the home past the breakeven point approx 6 years then I’ll be paying less for total life of loan. My question is if my interest rate doesn’t change by putting down more of a down payment in the size of what the discount points would cost me upfront is it ever better to put down more increase equity instead of using the money to buy points? Part 2-If I think rates will go lower and I might refi in the future how does buying the points now impact that future refi? Thank you so much for any guidance. 

2 Answers

  • 3 months ago
    Favorite Answer

    Borrow as much as you can on a 30 year fixed rate mortgage even if you do not need to because rates are at a historic low and inflation is coming.  Buying a lower rate by paying points is definitely worth considering if you know you will be living there for at least 10 years. 

    You do not say how old you are.  If you refinance within the breakeven period, you will definitely lose the remaining value of the points but you should refinance if, at any stage, there is at least a 1% difference between your current interest rate and the one you can get.

  • 3 months ago

    There is no reason to buy points right now.

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