What Are Mortgage Points and Should San Diego Buyers Pay Them?

What Are Mortgage Points?

A mortgage point equals 1 percent of your loan amount. Buying discount points means paying upfront cash to permanently lower your interest rate — also called buying down the rate. One point on a $700,000 San Diego mortgage equals $7,000. The strategy involves calculating how long you need to stay to break even on the upfront cost.

How Points Affect Your Rate

Typically, one discount point reduces your interest rate by approximately 0.25 percent — though the actual reduction per point varies by lender and market conditions. At current market rates, a 0.25 percent rate reduction on a $700,000 loan saves approximately $120 per month. Dividing the point cost by the monthly savings gives you your break-even timeline.

When Paying Points Makes Sense

• You plan to stay in the home longer than your break-even period — typically 5 to 7 years
• You have cash available for points without compromising your down payment or reserves
• Interest rates are high and you want to lock in a lower long-term payment
• The seller is willing to pay points as concessions — giving you a lower rate at no out-of-pocket cost

When Points Do Not Make Sense

• You plan to sell or refinance within a few years
• You need to preserve cash for down payment, closing costs, or post-purchase reserves
• You expect interest rates to fall and plan to refinance when they do
• Your lender is quoting points to compensate for a less competitive base rate

Seller-Paid Rate Buydowns in San Diego

In slower markets or when sellers are motivated, buyers can negotiate seller-paid discount points — effectively getting a lower interest rate at no additional cost. A seller contribution toward a rate buydown may be more valuable than an equivalent reduction in purchase price. Rieder Homes Group helps buyers structure offers to maximize this type of value.

Related Reading on RiederHomes.com:

→ Blog #7: Understanding Interest Rates

→ Blog #8: Rate Lock Strategy

→ Blog #6: Buyer Closing Costs

→ Blog #2: Mortgage Pre-Approval

— Mance Rieder, Broker Associate | Rieder Homes Group | REAL Broker | riederhomes.com | 858-295-0556