What's the point of points?

Dated: 10/18/2019

Views: 94

If you’re financing a property purchase, you’ve probably come across the term points or discount points. Although there are other meanings, most often these terms refer to prepaid interest, with one point equal to 1% of your mortgage loan.

Lenders offer borrowers the opportunity to purchase points on their mortgage, which means you’re paying upfront to lower the interest rate of your loan.

Here are some questions to ask when deciding whether you should buy points:

HOW LONG WILL YOU LIVE IN THE HOUSE? You usually benefit more from points the longer you stay in the property. That’s because of the savings you realize on each monthly payment will accumulate and eventually offset—hopefully exceed— your points payment.

CAN YOU AFFORD POINTS? You need to provide a downpayment and cover the closing costs to secure a mortgage. Do you also want to pay for points?

HOW MUCH WILL THE RATE COME DOWN? Each point costs 1% of the loan amount, but the interest-rate reduction you receive varies from lender to lender.

To recieve a list of mortgage lenders we use, just chat, Call or email.

Blog author image

Dwight Cook

BRILLIANT Real Estate Team, Technology Driven but Customer Focused. Let's Talk!....

Latest Blog Posts

What's the point of points?

If you’re financing a property purchase, you’ve probably come across the term points or discount points. Although there are other meanings, most often these terms refer to prepaid

Read More

International Homebuying is over 8 Billion Dollars

International Homebuying Activity Adds Nearly $8 Billion to Texas EconomyTexas ranked third in the nation for homes sold to international buyers from April 2018 to March 2019, according to the 

Read More

Survey Results: Is now a good time to buy or sell a home.

Low mortgage rates are fueling more favorable opinions on home buying. Nearly two-thirds of Americans—or 63%—believe now is a good time to buy a home, shows the National Association of

Read More

What could a recession mean for real estate?

National Snapshot: What’s Ahead for Real EstateThe U.S. unemployment rate is at a 50-year low, and consumer confidence remains high. In fact, the University of Michigan’s latest Surveys

Read More