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Mortgage points (or "discount points") are fees you pay to the lender upfront in exchange for a lower interest rate. One point typically costs 1% of the total loan amount. Paying for points can save you money over the life of the loan, but it increases your initial closing costs.

The break-even point tells you how many months it will take for the savings from a lower monthly payment to cover the higher upfront costs (from points and closing fees). If you plan to stay in the home longer than the break-even point, the loan with the lower rate and higher costs is often the better financial choice.

Consider your financial situation and how long you plan to live in the home.
• If you have cash for closing and plan to stay long-term, a lower rate with points may be best.
• If you plan to move or refinance soon, a loan with lower upfront costs (even with a slightly higher rate) is often smarter.
• If minimizing your monthly payment is the top priority, focus on the loan that delivers the lowest PITI.