Should I pay points on a mortgage to lower the rate?
“Paying points”—or leveraging mortgage discount points—can sometimes help you lower your mortgage interest rate. Deciding whether paying points is a good option for you depends on how long you plan to stay in your home: the longer the mortgage, the more beneficial paying points upfront may be.
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The more points on a mortgage you pay, the lower your rate will be. With each point costing 1 percent of the mortgage amount, the big questions are: How much you can afford to pay up front? And is that effort worth the long-term savings?
To help simplify this decision, consider how long you plan to stay in your home. The longer you plan on having your mortgage, the more advantageous paying for points up front may be. This is due to the longer time spent with a lower interest rate. If you plan on being in your home for a shorter time, paying the upfront expense of mortgage points might not be beneficial as it would not allow you enough time to make up the cost with interest savings.
Is paying for discount points the right choice for you? Let’s find out by comparing the cost of paying for more or less points.
Enter details for a single mortgage loan: fixed-rate OR adjustable-rate. Select the purchase price, down payment, term, and expected years in home.
First, select your interest rate and the lowest discount point percentage you are considering. If you may forgo discount points, enter “0.000%” to get a comparison of your payment with or without discount points.
Next, select your interest rate and the highest discount point percentage you are considering.
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