A mortgage point is a fee equal to 1% of the loan amount. There are two types of points: discount points and origination points. Discount points are actually prepaid interest on the mortgage loan. The more points you pay, the lower the interest rate on your loan and vice versa. Borrowers can typically purchase up to 3 or 4 points, depending on how much they want to lower their interest rate. Origination points are charged by the lender to cover the costs of making the loan.
Should I Purchase Mortgage Discount Points?
Your decision to purchase mortgage discount points should be based on a number of factors, such as how much cash you have available for a downpayment and how long you plan on staying in your new home. Let's take a look at some of the advantages and disadvantages of purchasing these discount points:
- Lower Interest Rate
- Smaller Monthly Payments
- Pay Less Interest Over Life of the Loan
- Build Equity Faster
- Points are Generally Tax Deductible
Disadvantages to Buying Mortgage Points
- Larger Upfront Costs
- Monthly Savings May Be Negligible
- You'll have Less Cash on Hand for Expenses
- Takes Longer to Break Even
- You'll Lose Money If You Sell/Buy Before Breaking Even
- Money May Earn Better Return Elsewhere
- Smaller Mortgage Interest Deduction
When it comes to purchasing a home at the Lake of the Ozarks or refinancing, I'm here for you every step of the way. I'll discuss financing options, offer competitive interest rates and back it up with the First Class service you deserve. For all of your Lake of the Ozarks home financing needs, give me a call at 573-746-7211.
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Sr. Residential Mortgage Lender
NMLS #: 493712
2265 Bagnell Dam Blvd, Suite B
PO Box 1449
Lake Ozark, MO 65049
Cell: (573) 216-7258
**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.