Discount points or ‘mortgage points’ let you pay extra upfront to lower your mortgage interest rate. Each point typically costs 1 percent of your loan amount and lowers your rate by about 0.25%.
In addition, if you plan to keep your home for a while, it would be smart to pay points to lower your rate. Paying $2,000 may seem like a steep charge to lower your rate and payment by a small amount. But, if you save $20 on your monthly payment, you will recoup the cost in a little more than eight years.
If you’re buying a home, you may be better off negotiating seller-paid points instead of a lower purchase price. So for a home listed at $200,000, instead of offering $196,000 (98 percent of the ...
The longer you expect to be in the home, the greater the advantage of paying points to lower your loan's interest rate. On the other hand, paying points may be disadvantageous if you intend to sell the home, refinance, or pay off the loan in the near future.
By paying points up front, borrowers are able to lower their interest rate for the term of their loan. If you plan to stay in your home for at least 10 to 15 years, then buying mortgage points ma
Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” which can lower your monthly mortgage payments. One point costs 1 percent of your mortgage amount (or $1,000 for every $100,000). Essentially, you pay some interest up front in exchange for a lower interest rate over the life of your loan.