Best Mortgage Advice On Buying Points

by Tom
(Pennsylvania, USA)

Regarding Best Mortgage Advice On Buying Points: Kate, what is your best advice on discount points? What is the purpose of points? Are they just a gimmick for the bank to get more money out of your pocket?

Kate Answers: Best Mortgage Advice On Buying Points

Hi Tom, A discount point, also known as prepaid interest, reduces a mortgage interest rate generally for the term of the loan. Each discount point costs 1% of the loan amount and lowers the interest rate by approximately 1/8th of a point. The exact amount can vary day to day.

Let's use these numbers in our illustration:

• 30 year fixed rate mortgage


• $250,000 loan amount


• 6% interest rate


• $1494 monthly payment

By paying 1% in discount points, it would cost $2,500 upfront and lower the interest rate to approximately 5.875%.

The $2500 discount point would reduce the monthly mortgage payment around $15 a month.

Over 30 years, the $2500 discount point of 1% results in mortgage payment savings of approximately $5500. Not too bad.

However if you follow the trend of most homeowners, keeping the mortgage only 5 years, you save $900 in reduced payments.

This means you spend $2500 in upfront discount points to save $900 over 5 years.

My Best Mortgage Advice

If I were thinking of buying discount points, I'd ask myself:

1. Do I think I'll keep this mortgage long enough to make paying points up front worthwhile?


2. Do I have enough cash to spend on discount points?


3. In the case of buying a house, can I negotiate for the seller to pay my points?

Consider these points to determine if paying discount points is in your best interest. You can probably come up with some of your own best mortgage advice pertaining to your individual circumstances.

Please keep in mind these figures are approximate only. You should consult your mortgage professional for exact figures pertaining to your specific situation.

I hope you'll come back to my website Get Your Best Mortgage Rate again in the future. Of course, all of my information is free.

So remember to bookmark Get Your Best Mortgage Rate to your favorites and visit often for up to date tips for buying a house, refinancing news and best mortgage advice.

You can also invite friends to comment on this page or create a page of their own like you did.

Best Wishes,




P.S. Go to my Best Mortgage Rate Blog, an entertaining source of mortgage information. Subscribe now to the RSS feed.

5 Steps to Getting Your Best Mortgage Rate

Step 1 - Find out how much you can afford in monthly house payments.

Step 2 - Insist on mortgage pre-approval.

Step 3 - How to discuss mortgage approval with your lender.

Step 4 - Become an expert on good faith estimates and mortgage closing costs.

Step 5 - How to successfully lock in mortgage rates.

Return from Best Mortgage Advice On Buying Points to Get Your Best Mortgage Rate

The information you obtain at this site is not, nor is it intended to be, a substitute for financial, real estate or legal advice. You should consult an attorney, accountant, lender or real estate agent, as applicable, for advice regarding your individual situation. Comments and opinions found here are not necessarily those of Get-Your-Best-Mortgage-Rate.com