Here's the math, using the standard monthly payments on a $350,000, 30-year fixed loan.
At 7.0%, the payment is $2,328.56. At 6.5%, it's $2,212.24. The lower rate saves $116.32 a month.
Break-even: $7,000 divided by $116.32 is 60.18 months, so the points pay for themselves during the 61st payment, a little over five years in.
After 6 years (72 payments): Compared with staying at 7.0%, the 6.5% loan has:
- $8,375.04 less paid in monthly payments
- a balance $2,191.64 lower ($322,228.79 vs. $324,420.43)
- minus the $7,000 you paid in points
That nets to about $3,566.68 ahead. The balance figures are the amortization schedule for each loan, so they count as the principal you'd pay down by selling.
Two things this leaves out: the sale's own costs (agent commissions, closing costs) are the same either way, so they don't change the gap, but any tax deduction for points (usually spread over the loan's life for a purchase, and it depends on your itemizing) and any difference in the points cost itself could shift the result. Also, if you might sell sooner than planned, the break-even point is what matters most. A mortgage professional or tax adviser can check the deduction side for your situation.
