When does it make sense to pay for mortgage points?
Sometimes when you hear people talking about mortgages you might hear the term “mortgage points.” In case you are wondering what that means, here’s the definition: Mortgage “points” are the fees a borrower pays in order to lower the interest rate on their loan.
Sometimes referred to as “discount points” – since it discounts your rate (but increases your closing costs). According to lender Brooke Lowry with Atlantic Coast Mortgage, the decision to use points relates to timeframe.
She says, “The clear advantage of paying points is that it lowers your monthly payment. The clear disadvantage is that is increases the amount of cash due at closing.
So, how do you decide if paying points makes sense or not? It really comes down to timeframe. Let’s say you pay $2,500 in points to lower your monthly payment by $50 per month.
