Does it make sense to buy points?


Do you think rates are going up (or down) significantly over the next month?

Also, does it make sense to buy points on a 10/1 ARM? Payback appears to be 3 years. Do you foresee the rates falling significantly below the current rates?

PS: Do you think rates will change significantly over the next 6 months?


Thanks :slight_smile:

Everyone wants to hear the answers. @Jil!

Rates are going higher in the short to medium turn. It’ll take a recession for them to go back down.

I never buy point.

It would pay back in 3 years. Why not?

Reward is not high enough to justify the point. You pay the point with the maximum return of 3.3 times in 10 years. Economic cycle exists and I don’t think T can make it go away for more than 3 years.

When something happens in Europe or Asia or South America, refinance opportunity should be there.

Also total savings is small, not worth the time to worry about it

Buy a combo of ghg, iq, ntnx, sq and rest for couple months.

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3 years is a LONG time. There’s a reason they let you buy points. It’s like an extended warranty. They offer it, because they make a lot of money on it.

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FED is planning to add 0.25% every quarter. They will hike rate until unemployment gets from 3.8% to 4.5% as per Powell (yesterday conference). This year 2 more and next year 2 more (six months once as of now projection). You can fairly assume that mortgage rates will go between 0.75% to 1% level in next one year.

Rates will go back to 2006-2007 level soon, i.e. fixed rate 30 year 5% level.

You said you have constraints to go for 30 fixed. I would prefer 1% or even 1.5% for 30 year fixed, but not for 10 year arm. IIRC, you are getting 3.265% for 10/1 ARM. Are you trying to get 3.5% APR or 3.25% APR?

We never know when we will refinance or when we sell…etc lot of uncertainties in future.

If the point is less than 0.5%, I think better to go for buy points for 10/1 ARM. Personally, I do not like to pay more than 0.5% points for rates (that too fixed, but not ARM).

We were planning to get a 10/1 arm. Our rates are pretty high—4.625% no points. There was only one lender that would take us because of the job change, lack of 2 year documentation on bonus, 20% down, not-yet-sellable stock towards reserve.

Mortgage broker thinks that in 6 months he could find another lender that would take us and get .5% off*. I don’t know if that would require putting another 10% down though.

We were originally quoted a 7/1, but I hadn’t intended to refinance early, and preferred the solid safety that a 10/1 gives us. In exactly 10 years, last kid will graduate high school. If we need to downsize, move out of CA, move into a trailer, or just be homeless, we can do so without any issues related to the kids. (Also the rates an jump quite high after the ARM period.)

Decided not to do 30 yr because we need to pay it off in 20 anyways [due to age].

* .5% lower loan through other lender if Fed doesn’t adjust rates at all.

After 8 years of looking, I think it unlikely we’ll be leaving in 3 years.


First, mortgage bankers are always at least 0.125% higher than big banks.

Second, do not count on getting another mortgage in 6 months esp growing rate hike period.

Mortgage rates are changing based on MBS (Mortgage backed securities) rates.This goes up and down like stock market.

If FED funds are changing does not mean mortgage rates are changing, but eventually it will. Does not have direct relationship between FED rate and Mortgages. Hard to guess what rate will be after 6 months.

Whatever you take it now will be the lowest possible.

Since you are locked 10/1 ARM, do not pay bigger point, just get zero point, but minor cost (less than $3000) mortgage for 10/1 ARM. The max point , if you want to bring down rate to qualify loan DTI, is 0.5% , which I suggest you to avoid.

The benefit is you have another chance to refinance in case economy tanks and refinance possible with less rate.