What Are Mortgage Points & Should You Pay Them?
Under certain circumstances, buying mortgage points when you purchase a home can save you significant money over the course of your loan. But it’s important to understand how they work and how long it takes for the additional upfront cost to be worthwhile. So this week, Mortgage Headquarters of Missouri is sharing with you some information on what points are and how they work. What Are Points, and How Much Do They Cost? "Points" are really called "Discount Points." Mortgage points are fees paid directly to the lender at closing in exchange for a reduced interest rate. Technically, they're considered pre-paid interest. One point = 1% of the loan amount. In general, the longer you plan to own the home, the more points help you save on interest over the life of the loan. Example: 1 point on a loan of $100,000 = $1,000. Should I Pay Them? When you consider whether points are right for you, it helps to run the numbers. Divide the upfront cost by the mon...