{"id":7276,"date":"2018-07-17T10:42:06","date_gmt":"2018-07-17T14:42:06","guid":{"rendered":"http:\/\/teammovemortgage.com\/?p=7276"},"modified":"2021-01-18T13:20:50","modified_gmt":"2021-01-18T13:20:50","slug":"mortgage-points","status":"publish","type":"post","link":"https:\/\/teammovemortgage.com\/blog\/mortgage-points\/","title":{"rendered":"What are Mortgage Points and Should I Pay Them?"},"content":{"rendered":"

So, the decision has been made to buy or refinance a home.\u00a0 All of a sudden, the term “mortgage points” keeps popping up in lender conversations.\u00a0 Lenders provide an interest rate and they keep saying things like zero points or that costs a point.\u00a0 What does that mean?\u00a0 In sports, I want as many points as I can get.\u00a0 Is it the same in mortgages?\u00a0 Actually, mortgage points is not important through most of your life.\u00a0 Of course, unless you are a mortgage lender!\u00a0 But, during the mortgage process it is important to understand this closing cost terminology<\/a>.<\/p>\r\n

\"mortgage<\/a><\/p>\r\n

Photo provided on Unsplash<\/a> by Sean Thomas<\/a><\/h6>\r\n

What are Mortgage Points?<\/h2>\r\n

Ok, about everyone understands the basics of getting a mortgage means paying back the money with interest.\u00a0 For the most part, the interest rate<\/a> makes sense.\u00a0 But, the costs that determine an interest rate is a key area as well.\u00a0 Those are points, also called discount points.\u00a0 Points are a percentage of the loan amount.\u00a0<\/p>\r\n

Basically the lower the interest rate, at some rate points will be charged.\u00a0 A popular term is called “buying down the rate” or like mentioned above, paying discount points.\u00a0 A certain rate may not cost you any points, which is good.\u00a0 Then a lower rate will cost you some amount of mortgage points.\u00a0 The lower the rate goes, the more points are charged.<\/p>\r\n

Should I Pay Mortgage Points?<\/h2>\r\n

Now we have the basic principles down.\u00a0 So, the question is should I pay mortgage points?\u00a0 The answer depends on each client’s scenario, goals, breakeven, and the interest rate options at that moment.\u00a0 Where things get confusing to borrowers is comparing one rate<\/a> to another.\u00a0 No matter whether they are with different lenders or just multiple options with one lender.\u00a0 The factors to consider in paying points include…<\/p>\r\n

    \r\n
  1. How long will I have this mortgage<\/li>\r\n
  2. How much does each point lower my payment and rate<\/li>\r\n
  3. Does it help me qualify<\/li>\r\n
  4. Could the seller pay this cost<\/li>\r\n<\/ol>\r\n

    All of this means, that the lowest rate<\/a> is not always the best option.\u00a0 For instance, living in a house for 3 more years and paying 2 discount points usually does not make sense.\u00a0 Let’s\u00a0use paying 2 points or $4,000,\u00a0in our example above.\u00a0 Also, let’s say this lowers the rate enough where the payment drops by $65 per month.\u00a0 It cost $4,000 to save $65 a month and over 36 months, the borrower recoups $2,340 (36 x $65) of it back.\u00a0 By the numbers, this would not make sense.\u00a0 But, remember sometimes it may be needed to qualify or maybe a seller or builder will pay this for you.<\/p>\r\n

    Mortgage Points Breakeven<\/h2>\r\n

    Just like the example in the preceding paragraph, it is important to determine the breakeven point.\u00a0 When will the extra cost become paid up.\u00a0 Other words, if the rate\/payment costs X, when will I make up for X in monthly savings?\u00a0 Once the initial cost has been recouped over time, the borrower is to the good every month after that breakeven.<\/p>\r\n

    Discussing Mortgage Points and Rates With An Experienced Loan Officer<\/h2>\r\n

    While this topic and choice is not an every day concern, it is a key point of discussion in choosing a mortgage loan.\u00a0 Especially important in this age of online mortgages<\/a> and call center type companies<\/a>, it is so important to have a thorough discussion with an experienced loan officer.\u00a0 Don’t just go by an advertisement, online quote, or someone just quoting a payment.\u00a0 Choose an experienced loan officer who will take the time to discuss your goals, scenario, and each mortgage option works for you as well as choosing to pay points or not. Reach out to start the conversation with an experienced mortgage loan officer, by completing the following or giving us a call.<\/p>\r\n

    \"Russell\r\n
    Your experienced mortgage lender<\/figcaption>\r\n<\/figure>\r\n\r\n\r\n\r\n

    Realtors can follow on ActiveRain<\/a><\/strong> or Connect on Linkedin<\/a><\/strong> for more news. See why service matters<\/a><\/strong><\/p>","protected":false},"excerpt":{"rendered":"

    So, the decision has been made to buy or refinance a home.\u00a0 All of a sudden, the term “mortgage points” keeps popping up in lender conversations.\u00a0 Lenders provide an interest rate and they keep saying things like zero points or that costs a point.\u00a0 What does that mean?\u00a0 In sports, I want as many points […]<\/p>\n","protected":false},"author":2,"featured_media":8777,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5,33,40],"tags":[1188,1189,1190,1191,1192,1193,1194],"class_list":["post-7276","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-1st-time-buyers","category-frequently-asked-questions","category-tips","tag-discount-points","tag-mortgage-points","tag-mortgage-points-breakeven","tag-should-i-pay-discount-points","tag-should-i-pay-mortgage-points","tag-what-are-mortgage-points","tag-what-are-points-on-a-mortgage"],"acf":[],"yoast_head":"\nMortgage Points Defined and When to Pay Mortgage Points<\/title>\n<meta name=\"description\" content=\"Mortgage points is a key term to understand during the purchase or refinance of a home. 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