Paying Points to Lower Rate

Whether you're financing a new home purchase or refinancing an exiting mortgage, a lender usually offers a range of interest rates at different amounts of points. A point equals one percent of the loan amount. For example, three points on a $100,000 mortgage loan would add $3,000 to the costs of the loan.

As a rule of thumb, each point reduces the interest rate a mortgage company is offering by about one eighth to one quarter of one percent. Generally, the lower the interest rate on the loan program, the more points the lending institution has incorporated into the loan.

Analyzing various interest rates and associated points will save you money.  If you plan to stay in your home for a long period of time, then it may be worthwhile to pay additional points to get a lower interest rate.  A Wyndham Capital Mortgage Banker can help you decide what combination of rate and points is best for you.