Would You Like To Have Mortgage Points Explained To You?

By Author: Scott Staudt
Total Articles: 91
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"Points" are the percentage points of a mortgage loan.

But the interest rate is paid over the entire life of the loan, and so a higher rate can increase the cost of the loan significantly.

If a borrower is willing to pay points to bring the loan rate to a "par" rate (the best rate available, usually available for the most credit worthy borrowers), or at least closer to the par rate, he will save a great deal of money over the long term, even though he has to put up more money now.

In a competitive buyers market, the seller may even consider paying these points since it will yield a more willing buyer, who will have lower loan payments in the long run.

But if you are paying the points, let's calculate the costs.

How will this affect the total costs of your loan?

Any loan calculator one can find on the net will give you your payments.

Let's say you choose the option of paying 2 points at a cost of $2,000 to reduce your loan rate to 5.5%
Interest: $104,404.04
Total Payments: $204,404.04
Mortgage Payment: $567.79.

This is the reason many people ...
... choose to pay points on their loans.
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