How Mortgage Points Work: When Does Buying Down Your Rate Make Sense?
Mortgage points, also called discount points, allow homebuyers to lower their interest rates by paying an upfront fee at closing. One point typically costs 1% of the loan amount and reduces the interest rate by about 0.25%, depending on the investor and market conditions. While this can lead to significant savings over time, it’s important to determine if buying points aligns with your financial goals.
The decision to buy points depends on how long you plan to stay in the home. If you expect to live in the house for many years, the savings from a lower interest rate can outweigh the initial cost of purchasing points. However, if you plan to move within a few years, you may not break even, making the upfront expense unnecessary. Calculating your breakeven point is essential before making this decision.
Another factor to consider is available cash. If using funds for points strains your finances or reduces your down payment, it may be better to keep your money for other expenses. Speaking with a Ellason Mortgage Group mortgage professional can help you evaluate the best strategy for your situation.
For expert guidance on whether mortgage points make sense for your loan, reach out to an Ellason Mortgage Group Loan Originator today!
