What Do Points Mean On A Mortgage Rate?
By Kevin LandisWhat do points mean on a mortgage rate? Do I have to accept points on my mortgage or can I refuse? What if I want points and the lender does not offer?
When you pay points on a mortgage you are basically paying an additional amount to have your interest rate dropped. A point equals 1 percent of the value of your mortgage. If you are mortgaging $150,000.00 one point would equal $1,500.00. Many lenders will offer you one rate with points and one without. For example you may be offered a 8% mortgage rate without points on the $150,000.00 or a 7.25% rate if you pay 3 points. This means your mortgage will increase to $154,500.00 but you will save considerably on the amount you repay from the lower interest rate. If you plan to stay in the home for over 4 years the point program will save you money. If you turn your mortgages over faster than 4 years a point program will cost you more.
Do I have to accept points on my mortgage or can I refuse?
You are not required to accept a points offer on your mortgage rate. The mortgage broker will present you with offers with and without points. If you do not intend to stay in the home for more than 4 years or if you refinance often you should avoid taking points. Points will save you money only in the long term on your mortgage rate.
What if I want points and the lender does not offer them?
If your lender has a higher rate and does not offer a points incentive you may wish to “shop” around. Banks, credit unions and private lenders are required to follow guidelines in their lending, but often they have many incentives that other lenders may not offer. An hour of research before applying can save you thousands of dollars on your mortgage rate.
Related posts:
- I Want To Get The Lowest Mortgage Rate, Will I Need To Pay Points?
- What Are Discount Points On A Mortgage Loan?
- Should I Pay Points to Lower My Mortgage Interest Rate?
- Does My New Refinance Rate Have To Be At Least 2 Points Lower Than My Current Rate?
- What Questions Should I Ask When Shopping For A Low Mortgage Rate?
