Mortgage points are simply an upfront investment you make to lower your interest rate. As a result, your monthly payment drops right from the start to make your home more affordable.
How Mortgage Points Actually Work
Buying a point reduces your interest rate for the entire life of your loan. So, if you buy down your rate by a quarter or half percent, you see that savings immediately. However, it requires a cash investment upfront. In fact, this fee sometimes equals one to three percent of your total loan amount.
When Paying Points Makes Financial Sense
You must stay in the home long enough to recoup your upfront investment. Because you pay a large fee at closing, you need to calculate if the lower payment covers that cost. If you plan to live there a long time, points make great financial sense. But if you move quickly, you might lose money.
Spokane Market Nuance: Negotiating Seller-Paid Points
You can actually negotiate to have the seller pay for your mortgage points. Depending on your loan type and down payment, sellers can contribute up to six percent of the purchase price. For a $500,000 house in Spokane, that equals up to $30,000. So, you do not always have to pay these out of pocket.
Have more questions about mortgage points or building a solid game plan? Visit spokanehomeguy.com or call 509-990-SOLD (7653) — we’re happy to walk you through it.
FAQ
Buying points requires an upfront cash investment based on your loan size. Typically, this fee equals one to three percent, or sometimes more, of your total loan amount. So, you need to plan for this extra cost at closing.
Usually, an upfront investment in points gets you a quarter or half percent in interest savings. However, this varies depending on your specific loan and the market. Your lender will calculate exactly how much your monthly payment will drop.
Yes, you can absolutely negotiate to have the seller pay for them. Depending on your loan type, sellers can contribute up to six percent of the purchase price. As a result, you might not need your own cash to get a lower rate.
