Is It Worth Paying Points to Lower Your Mortgage Rate on Long Island?

When you refinance or buy a home on Long Island, your lender might offer you the option to “buy down” your interest rate by paying mortgage points. It can be a smart way to save money over time — but only if the numbers work in your favor. Here’s how to decide whether paying points makes sense for your situation.

What Are Mortgage Points?

Mortgage points (also called discount points) are upfront fees you pay to lower your interest rate.

• 1 point = 1% of your loan amount.

• Each point usually lowers your rate by 0.25%, though this varies by lender and market conditions.

Example:
If your loan amount is $600,000, one point costs $6,000 and may reduce your rate from, say, 6.5% to 6.25%.

Why Long Island Homeowners Consider Paying Points

With higher purchase prices compared to many regions, even a small rate reduction can add up in monthly savings.

Homeowners often buy points to:

• Lower their monthly payment

• Save on long-term interest

• Increase affordability

• Qualify for a loan more easily when ratios are tight

Eric Berman REALTOR helps Long Island buyers and refinancers weigh these benefits against upfront costs.

How to Know If Paying Points Makes Sense

1. Calculate Your Break-Even Point

This tells you how long it will take for monthly savings to equal the upfront cost.

Formula:
Cost of points ÷ monthly savings = months until you break even

Example:

• Cost to buy 1 point: $6,000

• Monthly savings: $100

• Break-even = 60 months (5 years)

If you plan to stay in your home longer than the break-even period, buying points often makes sense.

2. You’re Planning to Stay Long-Term

The longer you keep the mortgage, the more you benefit from a reduced rate.

3. You Have Enough Cash Reserves

Paying points requires extra upfront money. Make sure it doesn’t drain your savings or impact your emergency fund.

4. Rates Are Unlikely to Drop Soon

If rates may fall in the near future, refinancing again later could reduce the value of your upfront investment.

When Paying Points Might NOT Be Worth It

• You expect to move or refinance within a few years.

• You prefer lower upfront costs.

• You’re using cash for renovations, debt payoff, or savings instead.

• Your break-even period is too long.

Tips for Long Island Homeowners

Compare Multiple Lenders

Rate reductions for points vary widely. Shopping around can save thousands.

Ask About Partial Points

You don’t need to buy whole points — even 0.25 or 0.5 points can meaningfully reduce your rate.

Consider Paying Points When Refinancing

If refinancing from a higher rate, buying points can maximize long-term savings.

Use a Local Expert

Eric Berman REALTOR works closely with lenders across Long Island to help homeowners model different rate-and-point scenarios.

FAQs

1. How much do mortgage points usually cost?
One point equals 1% of your loan amount. Contact Eric Berman REALTOR for a personalized estimate based on your loan size.

2. How much can points lower my rate?
Typically around 0.25% per point, but it varies. Reach out to Eric Berman REALTOR to compare local lender offerings.

3. Are mortgage points tax-deductible?
Sometimes — especially for primary residences. Ask Eric Berman REALTOR for CPA referrals who can clarify your situation.

4. Should I buy points if I plan to refinance again?
Probably not, unless your break-even period is very short. Speak with Eric Berman REALTOR to run the numbers.

5. Is buying points worthwhile in today’s Long Island market?
It depends on rates, your timeline, and loan amount. Get in touch with Eric Berman REALTOR for a customized analysis.

Eric Berman, REALTOR®
Compass Greater NY
917-225-8596
eric@ericbermanteam.com
www.theericbermanteam.com