When you take out a mortgage, you may be given the option to pay points in exchange for a lower interest rate. A mortgage point, also known as a discount point, is equal to 1% of the loan amount. For example, if you re financing $200,000, one point would cost $2,000. While paying points means you ll pay more upfront, it can offer long-term savings. Understanding the benefits of paying points on your mortgage can help you decide if it’s the right move for you.
Understanding the Financial Power of Mortgage Points
In the world of home financing, mortgage points are a powerful yet often misunderstood tool that can significantly impact your long-term financial outlook.
How Do Mortgage Points Cut Your Interest Costs?
Those who are involved in the real estate industry likely know that mortgage rates are at an all-time low. At the same time, nobody wants to pay more for a house than they have to. Some of the most important factors that dictate how much someone is going to pay for a house include points and interest rates.
An Overview Of Mortgage Points
There are two types of mortgage points: discount points and origination points. Discount points are used to buy down the interest rate on the loan, while origination points are used to cover the lender’s administrative costs.
