Mortgage rates are at an all time low but if you’re looking for an even lower mortgage rate, you can buy points towards reducing it. If purchasing points doesn’t make much sense to you, read on.
Understanding Purchase Points
Purchase points are also referred to as buy-down or discount points, so a lender may talk to you about it in those terms. Lenders are very familiar with them and many will negotiate a lower mortgage rate for a price. When you purchase one point, you reduce your mortgage rate by one percent.
The point amount depends on the amount of the loan. So if you have a 120,000 loan, a point would cost you 1,200. This money is due at closing.
Deciding Whether to Buy Points
There are a few variables to consider before purchasing points for a lower mortgage rate.
- If you want a lower monthly mortgage payment, you should buy points.
- If you are not going to live in your home for a long time, it’s probably not a good idea to buy points because they only benefit you over the long term of your mortgage.
- Make sure you have the money to invest in points, because it could delay your closing if you end up not having the money at that time.
Photo: quaziefoto
Tue, Mar 9, 2010
Mortgages