When you’re securing a mortgage — whether it’s for your first home, your forever home, or an investment property — every percentage point matters. That’s especially true for military families who often face frequent moves, fluctuating housing markets, and the challenge of balancing immediate needs with long-term goals.

In 2025, mortgage rates are still elevated compared to the ultra-low pandemic-era rates. By paying points upfront, you can significantly lower your monthly payment, which may improve cash flow and make your home more affordable month-to-month. 

“Understanding this strategy can empower you to make more informed, financially sound decisions for your family’s future and we’d be glad to help you ‘run the math’ to find the best scenario for your home loan,” says Robert Greenbaum, Chief Marketing Officer at AAFMAA Mortgage Service LLC (AMS). 

With rates still higher than in previous years, discount points become even more valuable. “Locking in a lower rate when rates are volatile or elevated gives you long-term protection against future increases,” notes Greenbaum. Plus, if rates decrease in the future, you can potentially refinance to lower your interest rate. However, keep in mind that refinancing your existing mortgage may increase the finance charges you pay over the life of the loan. 

Related: Do’s and Don’ts for a Smoother Mortgage Process

What Are Mortgage Points?

Mortgage points, also known as discount points, are upfront fees paid to your lender at closing in exchange for a lower interest rate on your loan. In essence, you’re prepaying a portion of the interest to “buy down” your rate. One point typically costs 1% of your total loan amount, and each point can reduce your mortgage rate by approximately 0.25%, though this varies by mortgage product, lender, and market.

 For example, on a $350,000 loan, one point would cost $3,500. In return, your lender might reduce your interest rate from 6.75% to 6.5%.

Why would anyone choose to pay more upfront? Because that lower interest rate may lead to significant long-term savings, particularly if you plan to stay in the home for more than five years.

Related: Top 8 Questions From Military Homebuyers (and the Answers)

Why Military Families Should Consider Points

Military families are no strangers to budgeting, planning and adjusting. Whether you’re on active duty, transitioning to civilian life, or planning for retirement, lowering your interest rate is one way to gain more financial flexibility. Here's how paying points can work in your favor.

Let’s say you’re financing $350,000 and paying two points to reduce your interest rate by 0.50%. You might save around $100–$150 per month. Over the years, that adds up. “While paying for points increases your upfront costs, the long-term savings often outweigh the initial expense, especially if you remain in the home beyond your break-even point, which is typically around 5-7 years,” says Greenbaum. 

“Let’s say you paid $7,000 in points and saved $125 per month. You’d break even in 56 months or just under five years. Stay in the home longer, and every payment after that point puts you ahead.”

Another benefit? Points may be tax-deductible, depending on your loan and financial situation. Always consult a tax professional to ensure you’re taking full advantage of available deductions.

Related: Understanding APR: A Guide for Military Homebuyers

Other Potential Benefits 

If you're buying a home to convert it into a rental property after a PCS, a lower interest rate can improve your rental cash flow. A lower monthly payment means the rent paid by your future tenants is more likely to cover the mortgage, even in a shifting rental market. “This makes paying points attractive for military families who buy with long-term rental income in mind,” says Greenbaum.

Also, in competitive housing markets, some sellers offer closing cost credits. Rather than using those funds for furniture or upgrades, consider applying them to mortgage points. This allows you to lock in a lower rate without additional out-of-pocket costs, turning a seller concession into long-term savings.

When Paying Points Might Not Be the Best Fit

Mortgage points aren’t the right move every time. Here are a few scenarios where you might want to skip them:

• You’re planning to PCS soon. If you’re likely to sell or move within a few years, you may not live in the home long enough to recoup the upfront cost.
• If your savings are stretched to cover your down payment and emergency fund, it’s better to hold onto that liquidity for the loan closing.
• If you’re using a VA Home Loan with already competitive rates, paying for a lower rate may not result in meaningful savings.
   

That’s why it's crucial to calculate your break-even point and speak with a trusted lender—or an AMS Military Mortgage Advisor, before making a decision. We offer a variety of financial tools, including this online calculator, to help potential homebuyers evaluate their options like paying points. 

How to Make Your Mortgage Work for You

Military families face unique housing challenges and opportunities. The decision to pay points on a mortgage isn't just about math; it’s about planning your financial future, creating stability and maximizing your benefits.

Says Greenbaum: “If you can invest a little more upfront — and you have a longer timeline to stay in the home — paying points can be a savvy way to gain more financial control.”

We’re Here to Help

Whether you’re thinking about buying, ready to start home-shopping in earnest, or considering a refinance, one of our Military Mortgage Advisors, a licensed mortgage loan originator, will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.

Ensuring Armed Forces Mutual Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!