The point of points

Dated: October 20 2020

Views: 21

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

Buying Virtually?

Now could be a great time to take advantage of our Virtual Home Buying Program! For several years we have helped buyers purchase homes without ever leaving the comfort and safety of your home. 

Read More

The Charm of an Existing Home

Prefer the Charm of an Existing Home?When homebuyers begin their research, they want to see all their available options! In many cases, they will include both new construction and existing homes in

Read More

Identity Theft

How to Prevent Identity TheftOnly carry essential documents and cards with you.Avoid carrying extra credit cards, your Social Security card, birth certificate or passport with you outside the house

Read More

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