Mortgage Points Explained | You Can Buy Your Mortgage Rate Down!

 

Have you heard the term “Points” or “Paying Points” on a mortgage loan? What are points?

Through the home loan process, you will often hear the term, points & mortgage points the cost of which is directly related to good and low-interest rates.
Every mortgage from FHA loan, VA loans, conventional, USDA, Jumbo loans all offer options to pay these points to lower an interest rate.
Commerce Home Mortgage is no different as we will offer an analysis of if it makes sense to pay points before you do it. Often when looking online, many lenders will post a very low-interest-rate that is only available by paying points. It’s is misleading advertising. So be careful with these companies. Paying points (1 point is exactly 1% of the loan amount) can be a very useful and smart thing to do. But… it’s all in the math! Step number 1 is evaluating how long you plan to keep the home. If the answer is short term, it probably does not make much sense to pay mortgage points. When you take the total cost of the points, for this example I will use $3,000 and evaluate how much additional money you will save per month, let’s say $50, divide the $50 per month into the $3,000 and the answer is 60. If you plan on keeping the home less than 5 years (60 months) then paying points would result in a loss for you.
Maybe the goal is to keep the house for 15 years, then you would enjoy 10 years of savings at $50 per month!
 
Call me and I’ll help you evaluate your individual circumstance and whether it’s a good move for you!