How do mortgage points work in Wisconsin?
Rob Miller explains what discount points are, how much they cost, and exactly when buying down your rate makes financial sense for Wisconsin buyers.
Rob Miller, Branch Manager at MadCity Home Loans, cuts through the confusion around mortgage discount points.
How do mortgage points work in Wisconsin?
A mortgage "point" is simply 1% of your loan amount paid upfront at closing in exchange for a lower interest rate. On a $300,000 loan, one point costs $3,000.
How Much Does a Point Reduce Your Rate?
This varies by lender, market conditions, and loan type — but generally, one discount point reduces your rate by approximately 0.25%. That translates to roughly $40–$50/month in savings on a $300,000 loan.
The Break-Even Math
The key question is: how long will you keep the loan? If one point costs $3,000 and saves you $45/month, you break even in 67 months (about 5.5 years). If you plan to stay and keep the loan longer than that, buying the point makes financial sense. If you'll sell or refinance sooner, don't buy them.
When Points Make Sense
- You're buying a forever home or long-term primary residence
- You have extra cash at closing beyond your down payment and reserves
- Rates are elevated and you want to lock in a lower payment permanently
- You've calculated the break-even and you'll clearly surpass it
When Points Don't Make Sense
- You're planning to sell or move within 3–5 years
- You need every dollar for reserves or home improvements after closing
- You expect rates to drop and plan to refinance within 2 years
Related Post: See a real example of buydown math in our Mortgage Rate Buydown Strategy article.