Are you buying a home in Rhode Island and wondering whether it makes sense to pay points on your mortgage?

This is a question many buyers in Warwick, East Greenwich, Cranston, Coventry, North Kingstown, and Providence ask when evaluating their financing options. If you’re weighing the benefits of buying down your interest rate with mortgage points, you’re not alone. Understanding how mortgage points work—and when they make sense—can help you make a smarter financial decision as you purchase your next home.

What Are Mortgage Points?

Mortgage points, sometimes called discount points, are optional upfront fees you can pay to lower your interest rate on a home loan. Typically:

• 1 point = 1% of your loan amount

• Each point reduces your interest rate by approximately 0.25% (though this varies by lender)

So, if you’re borrowing $400,000 and opt to pay 1 point, you’d pay $4,000 upfront in exchange for a lower interest rate over the life of the loan.

Why Buyers in RI Are Asking About Points

The Rhode Island real estate market, especially in Warwick, East Greenwich, Cranston, Coventry, North Kingstown, and Providence, has remained competitive—and prices have steadily climbed over the past decade. In a market where affordability is top of mind and mortgage rates have fluctuated, many buyers are exploring ways to keep monthly payments down. That’s where paying points comes in.

But the real question is: Should you do it?

Let’s look at the pros and cons.

Benefits of Paying Points on a Mortgage

1. Lower Monthly Payments
The biggest draw for many Rhode Island homebuyers is simple: points reduce your interest rate, which lowers your monthly payment. This can offer real savings, especially on higher loan amounts.

2. Significant Long-Term Interest Savings
If you plan to stay in your home long-term—typically 7 years or more—you’ll likely save thousands of dollars over the life of your loan by paying points.

3. Potential Tax Deduction
According to the IRS, mortgage points paid for the purchase of a primary residence may be tax-deductible in the year you pay them. Always check with a qualified tax advisor, but this could offer additional savings.

4. More Predictability in Budgeting
If you’re planning to settle down in a home in Warwick, Cranston, or East Greenwich for the long haul, paying points can make it easier to plan your household finances over time.

Drawbacks of Paying Mortgage Points

1. Higher Upfront Costs
Rhode Island homebuyers already face closing costs, moving expenses, and potential updates or renovations. Adding points to your closing costs can stretch your budget thin.

2. Break-Even Period
You need to stay in the home long enough to "break even" on your upfront investment. If you move or refinance before that point, you may lose money instead of saving it.

3. Not Ideal for Short-Term Buyers
If you think you’ll sell your home in less than 5–7 years (a common timeframe for first-time buyers in Providence or Coventry), paying points often doesn’t pay off.

4. Lost Opportunity Cost
That money could be used elsewhere—toward a larger down payment, emergency savings, or even furnishing your new home.

When Paying Points May Make Sense in Rhode Island

Here’s when it might be smart to pay points:

• You plan to stay in the home for 10+ years

• You’re buying a higher-priced home (where the interest savings are more substantial)

• You want the lowest monthly payment possible

• You have extra cash to spare at closing

For example, if you’re buying a home in North Kingstown and expect to live there until retirement, paying points now could lead to significant long-term savings.

When It Might Not Be Worth It

Paying points may not be the best choice if:

• You’re tight on cash at closing

• You expect to refinance within 3–5 years

• You plan to relocate within a few years

• You’re taking advantage of down payment assistance programs or closing cost credits that may not allow points

How to Calculate the Break-Even Point

To find your break-even point, divide the cost of the points by the monthly savings on your mortgage. For example:

• Paying 1 point ($4,000) saves you $100/month on your mortgage

• $4,000 / $100 = 40 months

That means you’d need to stay in the home for at least 3.3 years just to break even. Everything after that is savings.

Local Programs to Explore

If you’re considering paying points but concerned about your budget, Rhode Island has helpful programs for eligible buyers:

• RIHousing offers down payment and closing cost assistance, which could free up cash to pay for points.

• Some lenders offer lender-paid points, where you get a lower rate in exchange for a slightly higher loan amount.

Work with a Rhode Island real estate agent or mortgage lender who understands these programs and can help you evaluate the trade-offs.

Final Thoughts for Buyers in Warwick and Beyond

Paying mortgage points can be a powerful tool for Rhode Island buyers—but only if it aligns with your long-term goals.

If you’re staying in your home long enough and can comfortably afford the upfront cost, it could save you thousands over the life of your loan. But if flexibility or short-term affordability is more important, skipping points and putting those funds elsewhere may be the better move.

Either way, it pays to work with a local expert.

Ready to Explore the Right Mortgage Strategy?

If you’re thinking about buying a home in Warwick, East Greenwich, Cranston, Coventry, North Kingstown, or Providence, reach out to Nick Slocum or one of The Slocum Home Team’s top agents today. We’ll connect you with trusted lenders, run break-even analyses, and help you make the smartest move possible in today’s Rhode Island real estate market.