We’ve said it before and we’ll say it again, purchasing a home is one of the biggest financial decisions one can make in their lifetime. Those home buyers who could use help with financing may want to consider using mortgage points.
What are Mortgage Points?
Mortgage points, or discount points, are fees paid to the lender at closing to reduce the borrower’s interest rate. Completely optional for homebuyers, paying for discount points can lower the monthly mortgage payments and is often referred to as “buying down the rate.”
How do they work?
Homebuyers buy points from their lender and each point costs 1% of the mortgage amount. For example, one point of a $400,000 mortgage would be $4,000. Each point lowers the rate by 0.25% and homebuyers can buy more than one point or fractions of a point.
What are the Benefits of paying with Mortgage Points?
- Lowers interest rate for the buyer
- Lowers monthly mortgage payments
Keep in mind your monthly savings depend on the interest rate, the amount borrowed, and the length of the loan’s term.
To learn more about mortgage points and determine whether they are right for you, contact a VanDyk Loan Originator today!