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The Best Time to Buy Mortgage Points


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TERMINOLOGY

Mortgage points are offered by lenders and are added into the closing costs of a loan. A mortgage point equals one percent of the total mortgage balance. Depending on the loan, you may have the option of buying a few mortgage points. While you can almost always buy them if you want to, it is not always in your best interest to do so. 

Lower Interest Rate
With discount points on mortgages, you will pay one percent of the loan for each point that you request. For each point that you pay for upfront, the lower your interest rate will go. Therefore, this is essential if you require a low mortgage payment. 

One way that it can be very beneficial is if you have a lump sum of money, but do not have much monthly income. In this case, it would most likely be to your advantage to request a few mortgage points. This will make your interest rate lower and will therefore decrease your monthly mortgage payment. 

If you do not necessarily need to save on your mortgage payment and you do not have excess cash up front, you may not benefit from buying mortgage points. This results in you having to come up with more money for closing costs.