Mortgage points cost $2,700. Here's when the 5-year math works.

You've found a home, your lender has approved you, and now the loan officer says: "You can buy the rate down." One discount point will cost $2,700 on your $270,000 loan and drop your rate from 6.52% to 6.27%. You've heard the standard advice — save the cash, rates will fall, refinance in two years. Here's the part that advice assumes, and why that assumption may no longer hold.

At 6.52%, the break-even on one point is 61 months. If you refinance before month 61, you spend $2,700 and recover less than $2,700 in savings. The math is simple. What changed is the probability that you'll actually refinance early.

CME FedWatch data from June 12, 2026 now prices a 68% probability of a Fed rate hike before year-end — driven by May CPI hitting 4.2% year-over-year, a 3-year high. Six months ago, the same tool showed three cuts priced in for 2026. If rates rise instead of fall, the refinance window closes. Your bought-down rate becomes the best rate available, and the points pay off in full — then keep paying for the remaining loan term.

What mortgage points actually do

A discount point is prepaid interest — 1% of your loan amount paid upfront in exchange for a lower interest rate. One point typically buys a 0.25% rate reduction. Here's how that plays out on a $270,000 loan at today's rates:

The break-even is the same whether you buy one point or two, because the cost and savings scale together at the same ratio. What changes is the total dollars at stake.

One important variable: not every lender offers exactly 0.25% per point. Some offer 0.20%, some 0.30%. The Loan Estimate you receive within 3 business days of applying shows every rate-and-cost combination your lender offers — compare before you decide, and compare across lenders, not just across options at one lender.

So what for you: If you're holding the mortgage past year five, one point at 6.52% is a guaranteed return on $2,700 — paid back in full by month 61, then savings-only for the remaining loan term.

The refinance assumption that just changed

The conventional argument against buying points ran like this: rates will fall, you'll refinance before break-even, and the $2,700 is wasted. That argument was reasonable in 2023 and 2024 when Fed cuts were broadly expected.

Today, the market has inverted. May CPI hit 4.2% year-over-year, the highest print in three years. CME FedWatch (June 12, 2026) now shows a 68% probability of a rate hike before December — not a cut. That's a material shift from the cut expectations that prevailed at the start of the year.

What this means for points: if the December hike lands and 30-year rates move to 7% or higher, your bought-down 6.27% rate becomes a below-market rate you'd never refinance away from. The 5-year break-even stops being a "best case" and becomes a near-certainty. Every month after month 61 is pure savings — $44/month for the remaining 25 years of a 30-year mortgage, or $13,200 net after repaying the point cost.

The December rate hike probability analysis ran the numbers on waiting to buy versus buying now. Points fit the same logic: if the direction of rates has shifted from down to up, the cost of locking in a lower rate today just became more defensible.

So what for you: The refinance-within-two-years scenario is now the minority outcome on CME pricing. If you're buying regardless of rate direction, asking your lender for the one-point option is worth 10 minutes of your time before you close.

How the math changes at different loan amounts

The 61-month break-even is consistent across loan sizes because the cost and savings always scale at the same ratio. The dollar stakes differ:

"Net gain at year 10" = monthly savings × 120 months minus the upfront point cost. These figures assume 0.25% rate reduction per point at 6.52%, which is the standard but not universal lender offering — confirm the exact figures on your Loan Estimate.

So what for you: On a $400k loan, one point delivers $3,800 net by year 10. It's not dramatic, but it's a guaranteed, low-risk return made once at closing.

When points don't make sense

Three situations where buying points is the wrong call.

If you plan to sell or move within five years, the break-even never arrives and the upfront cost is a pure loss. A starter home you expect to upgrade in 2030 is not the right place for discount points.

If buying points requires you to increase your loan balance to fund the upfront cost, the math inverts. You'd be paying 6.52% interest on the borrowed $2,700 while saving $44/month — and the interest on the extra principal partially or fully offsets the monthly savings.

If you're cash-constrained after covering the down payment and closing costs, keep the cash. Down payment assistance programs, seller concessions, and shopping three lenders before you lock all have larger impact for tight-cash buyers than points do. The gap between the best and worst lender quote on a $270k loan is typically 0.25%–0.50%, worth $44–$88/month before you spend anything on buydowns. Start there.

So what for you: Points belong at the end of the optimization checklist, not the beginning. Lender shopping first, points second — only if you're cash-positive after everything else is covered.

The call

The math points toward this: if you're buying a home in the $250k–$400k range, you have surplus cash after all closing requirements are covered, and you plan to hold for six or more years, ask your lender to show you the one-point scenario before you close. The 5-year break-even is straightforward, and with a December rate hike now the most probable Fed outcome, the refinance argument against points is weaker than it has been since 2022.

Frankly, for a first-time buyer on a $270,000 loan who is cash-comfortable at closing and buying a home to settle into for the next decade, one point is worth running. The $2,700 cost is real. So is the $13,200 in savings it produces over the remaining loan term once you've passed break-even.

Before you get there, make sure you've done the work that matters more: compared at least three lenders on the same loan amount and reviewed the Section A charges on your Loan Estimate. Those two steps produce larger savings with no upfront cost.