A point is simply 1 percent of the loan amount. If you choose to “buy your rate down,” or pay “discount points,” you will get a lower interest rate.
All else being equal, the more you pay upfront, the lower your interest rate and monthly payment will be. But buying points might not pay off unless you keep your mortgage long enough to recoup your upfront costs with your monthly savings.
Deciding whether to pay points is a personal decision. Home buyers with plans to sell or refinance within a few years should usually not pay discount points. In for a 30-year fixed-rate mortgage, one discount point should reduce the rate by 0.125 to 0.25 percent.
For many home buyers, discount points are 100 percent tax-deductible in the year in which they are paid.
The information contained on this website is for informational purposes only and is not an advertisement for products . The views and opinions expressed herein are those of the author and do not reflect the policy or position of Brokerage. Source: The Mortgage Reports