Points

Points are an upfront fee you pay to receive a lower rate over the life of the home loan. Typically, 1-point lowers your mortgage rate by 0.25% and costs approx. 1% of your loan amount. An example: if the current rate is, 4.5% on a $480,000 loan, 1-point is $4,800 and your interest rate would be reduced to 4.25%.

Mortgage rates are well below the 50-year average of 8%. That said, buying mortgage points is a simple way to lower your mortgage payment and save money long term. If you have the extra funds, it can be a great strategy.

For example:

  • Purchase Price: $600,000

  • 20% Down Payment: $120,000

  • Loan Amount: $480,000

  • 4.5% Interest Rate

  • 30-Year Term

  • = $2,432.09 Principle & Interest Monthly Payment

So if you Paid 1-Point:

  • Same as above but with a 4.25% Rate

  • = $2,361.31 Principle & Interest Monthly Payment

  • The difference is $70.78 monthly

  • Your investment is covered after 5.5 years. Over the life of the loan, you would save $25,480, if you stay in the home, the math says it’s a wise move, however, how long you will live in the home will determine this. Also, we have to see if you can buy down the rate via ATR/QM which is a limit on the amount you can contribute at closing.

Call to discuss further, Ray (470) 481-3947