| Paying discount points at closing can get you a lower | | | | keeping the home for a long time. You can calculate |
| mortgage rate; however, you need to run the numbers | | | | your potential savings from paying discount points and |
| to make sure paying points is beneficial in your | | | | how long it will take you to recoup the expense with a |
| situation. Discount points are different from the | | | | simple online mortgage calculator. |
| origination points you'll be required to pay; you want to | | | | The main disadvantage of paying discount points is |
| avoid overpaying for origination fees. Here are the | | | | that you'll have to come up with the cash prior to |
| basics of points to help you decide if paying discount | | | | closing and if you don't stay in your home long enough |
| points is right for you. | | | | you may not recoup the expense. To calculate if |
| Discount Points vs. Origination Points | | | | paying discount points is beneficial for you, divide the |
| Points come in two flavors. There are the discount | | | | amount you pay by how much lower your mortgage |
| points you pay in exchange for a lower mortgage rate | | | | payment will be. This will tell you how long it will take to |
| or better terms, and the origination points you pay to | | | | recoup paying discount points on your home mortgage |
| the mortgage company or broker that sells you the | | | | refinance loan. |
| loan. In both cases one point equals one percent of | | | | Suppose that your home mortgage refinance loan is |
| your loan amount. When you elect to pay discount | | | | for $150,000 and you qualify for 6.5% with zero points |
| points you typically lower your interest rate by .25% | | | | or you can pay two points and qualify for 6.0%. The |
| for each point you pay. Origination points paid to your | | | | monthly payment without points will be $947; paying |
| mortgage company or broker should never be more | | | | two points will lower your payment to $917 per month |
| than 1.5% of your loan amount. Anything more than a | | | | for a savings of $30 per month. You will pay $3,000 to |
| point and a half for loan origination is considered | | | | save $30 each month and it will take you just over |
| excessive. | | | | eight years to recoup this expense. |
| Pros & Cons of Paying Discount Points | | | | You can learn more strategies for refinancing your |
| Paying discount points for your home mortgage | | | | mortgage without overpaying by registering for a free |
| refinance loan can save you money if you plan on | | | | home mortgage refinance loan tutorial. |