As a first-time home buyer, there can be so many new concepts, options, and terms flying around, it can sometimes feel a bit overwhelming. And when you’re making a life-changing purchase like a house, the last thing you want to feel is confused and unsure. Here at CapCenter, we want to breakdown and help you understand every aspect of purchasing your home, so you can be confident that you’re making the right move. Today’s topic: Mortgage Points.

What are mortgage points?

Whenever you have to take out a loan to purchase a new house, your mortgage will include interest on the payment so that the lender makes money over time. And while interest rates can change, depending on the type of loan you get, they can also stay fixed for a certain period of time. Which is where Mortgage Points come in.

Mortgage Points, also known as discount points, are essentially percentages of the interest that you can buy up front in order to save money in the long run. To help you understand, one Mortgage Point is equal to one percent of the loan amount. For example, let’s say the loan is for $200,000 – Well, one Mortgage Point would be $2,000 (or 1% of the loan) – this, in effect, would lower your interest rate by about .25%.

So, let’s say your interest rate is 3.5% on the $200,000 loan. If you bought two Mortgage Points ($4,000) it would drop your overall interest rate down from 3.5% to 3% -- this is essentially prepaid interest.

By doing this, you lower the overall monthly payment on the mortgage. Over time, this could save you money.

When does it make sense to buy down?

Well, if you plan on living in your house for a long time, then it may make sense to buy down on your rate. Because, depending on the interest rate and how much you buy down, you could end up saving quite a bit of money after you’ve recouped what you paid up front.

However, if you do not intend on staying in the house you purchased very long, then it likely doesn’t make sense to buy down points, because you will have not stayed in the house long enough to recoup your investment to buy down the rate.

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When you're navigating the complex world of mortgages, realty, or insurance, you don't have to go it alone. CapCenter’s team is here to help no matter where you are in the home-buying process.

Whether you're a first-time homebuyer wondering about the first steps or a seasoned homeowner in search of savings, we are committed to providing personalized guidance and exceptional service. Don't hesitate to give us a call, our team of experts is ready to assist you with any questions or concerns you may have.

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