Pay more upfront to save over time? Mortgage points can reduce your rate—but only if the math works in your favor.
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There are always decisions to make when buying a house. Some of them include the amount to borrow, the loan term, and the type of loan. Another consideration is whether you want to buy mortgage points.
Points can be used to reduce the mortgage rate. This reduces the monthly payment. Here’s a breakdown of how points work and when it’s a good idea to buy them.
Mortgage Points Are Discount Points
Mortgage points are sometimes called prepaid interest points or discount points. They are a one-time fee you pay upfront to lower your interest rate on a home purchase or refinance.
Anne Johnson was a commercial property and casualty insurance agent for nine years. She was also licensed in health and life insurance. She went on to own an advertising agency, where she worked with businesses. She has been writing about personal finance for 10 years.
