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Seattle homeowners calculating their mortgage refinance breakeven point to determine if paying discount points is worth it

Why Paying Discount Points May Not Be the Best Choice When Refinancing in Seattle

February 17, 20252 min read

If you're a homeowner in Seattle considering a refinance, you may have encountered the option to pay discount points to lower your mortgage interest rate. While this may seem like a smart move, it’s crucial to understand why paying points may not actually save you money in the long run—especially if you refinance again before breaking even.

What Are Discount Points?

Discount points are upfront fees paid to your lender at closing in exchange for a lower interest rate. Typically, one point costs 1% of your loan amount and reduces your rate by about 0.25%. While this can lower your monthly payment, the real question is: Will you stay in the loan long enough to recoup the cost?

The Break-Even Point: When Do You Start Saving?

The break-even point is the moment when the savings from a lower interest rate surpass the upfront cost of the points you paid. Here’s the problem—many Seattle homeowners refinance every 3 to 5 years due to changing interest rates, life circumstances, or home value appreciation. If you refinance again before reaching your break-even point, you lose money instead of saving it.

To calculate your personal break-even point, use our mortgage savings calculator here and see if paying points makes sense for your refinancing goals.

Why Paying Discount Points May Not Be the Best Choice in Seattle

  1. You Might Refinance Again – Seattle's real estate market is dynamic, and many homeowners refinance multiple times to take advantage of better rates, cash-out options, or shorter loan terms.

  2. You Plan to Sell Soon – If you’re not staying in your home for at least 5-7 years, the upfront cost of discount points may not be worth it.

  3. You Have Better Ways to Use That Money – Instead of paying points, you could invest the funds elsewhere—such as home improvements, savings, or other investments.

  4. Rates May Drop Again – If mortgage rates decrease after you refinance, you may want to refinance again, meaning you’ll never fully benefit from the discount points you originally paid.

What Should You Do Instead?

Rather than committing to discount points, consider:

✔ Opting for a slightly higher rate with no upfront fees

✔ Keeping your cash for other investments or savings

✔ Working with a mortgage expert to explore better loan options

Let’s Find the Right Refinancing Strategy for You

Seattle homeowners deserve a smart, cost-effective refinancing plan. Before paying discount points, make sure you’ll actually benefit in the long term.

📊 Use our mortgage savings calculator here: Click to calculate your break-even point

Seattle mortgage refinanceDiscount points vs savingsRefinance breakeven calculator
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Said Hamood - Seattle Mortgage Broker

Said Hamood has been in the mortgage industry for over three years, finding fulfillment in helping others achieve homeownership. Whether you're buying your first home, upgrading, or refinancing, he’s committed to making the process simple and stress-free. By actively listening to clients’ goals, he tailors financing solutions, offering conventional, jumbo, FHA, and VA loans to fit their needs.

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Pre-approval means a lender has evaluated your financial information and determined the loan amount you're eligible for. It’s crucial because it gives you a clear idea of your budget, helps you compete with other buyers, and speeds up the closing process once you find a home.

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What types of loans are available for first-time homebuyers?

There are several loan options, including FHA loans, USDA loans, and conventional loans. The best option for you depends on factors like your credit score, income, and the location of the home. I can help you compare the options and choose the best one for your situation.

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Can I get a mortgage if I have student loans or other debt?

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How long does the home buying process take?

The process typically takes about 21 to 45 days from the time you make an offer to closing. However, this can vary depending on factors like inspections, appraisals, and the lender's processing time. I’ll keep you updated every step of the way so you know what to expect.

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What happens if my offer on a home is accepted?

Once your offer is accepted, the next steps include signing a purchase agreement, scheduling inspections, and finalizing your mortgage application. From there, the lender will process your loan, and we'll work together to ensure everything is in place for a smooth closing.

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How do I know if I’m ready to buy a home?

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What is an FHA loan?

An FHA loan is a government-backed mortgage designed to help first-time homebuyers and those with less-than-perfect credit. It typically requires a lower down payment (as low as 3.5%) and has more flexible credit requirements, making it an excellent option for those who might not qualify for conventional loans.

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What is a VA loan, and who qualifies?

A VA loan is a mortgage loan backed by the U.S. Department of Veterans Affairs, designed for military service members, veterans, and certain members of the National Guard and Reserves. It typically requires no down payment or private mortgage insurance (PMI), making it a great option for those who qualify.

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What is a USDA loan?

A USDA loan is a government-backed mortgage offered to homebuyers in rural and suburban areas. It requires no down payment and offers competitive interest rates. To qualify, buyers need to meet income and property location requirements, making it a great option for those looking to buy in rural areas.

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What is a conventional loan?

A conventional loan is a mortgage that is not insured or backed by the federal government. These loans usually require a higher credit score and a larger down payment than FHA loans, but they come with more flexible terms and potentially lower mortgage insurance costs if you put down at least 20%.

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What is a jumbo loan?

A jumbo loan is a type of mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These loans are typically used for luxury or high-value homes and require stricter credit and income qualifications. They also tend to have higher interest rates due to the larger loan amounts.

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What is a fixed-rate mortgage?

A fixed-rate mortgage is a loan with an interest rate that stays the same throughout the life of the loan, typically 15, 20, or 30 years. This provides stability and predictable monthly payments, making it a popular choice for many homebuyers.

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What is an adjustable-rate mortgage (ARM)?

An adjustable-rate mortgage (ARM) is a type of loan where the interest rate can change periodically based on market conditions. ARMs typically start with lower rates for the first few years and then adjust. While this can offer lower initial payments, it comes with more risk as rates can increase over time.

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What is a renovation loan?

A renovation loan, like the FHA 203(k) loan, allows you to finance both the purchase of a home and the cost of repairs or renovations in one loan. This can be a great option if you want to buy a fixer-upper and make improvements to it, as it allows you to finance the project upfront.

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Said Hamood - Seattle Mortgage Broker - NMLS#1827048

Said Hamood | NMLS #1827048 | Barrett Financial Group, L.L.C. | NMLS #181106 | 275 E Rivulon Blvd, Suite 200, Gilbert, AZ 85297 | TX view complaint policy at www.barrettfinancial.com/texas-complaint | WA MB-181106 | Equal Housing Opportunity | This is not a commitment to lend. *All loans are subject to credit approval. | mlsconsumeraccess.org/EntityDetails.aspx/COMPANY/181106