Yes! Mortgage Rates Really Did Move HIGHER After The Fed Rate CutBy: Matthew Graham2 Hours, 57 Min agoWe publish daily coverage of mortgage rate movement and have done so for nearly 20 years.
What’s the Deal with Mortgage Points?
Dated: January 11 2023
Views: 129
If you apply for a mortgage loan today, your lender might propose that you pay a discount point or two to get a better deal. But what are discount points exactly and will they really be beneficial?
One mortgage point is equal to 1% of the loan principal, so if you plan to take a loan for $300,000, a point is $3,000. Points are sort of a prepayment on a loan to avoid paying a certain amount of interest in the future. Each point shaves off approximately a quarter percent of your interest rate. Before you agree to pay a point or more to your mortgage lender, ask yourself these questions:
1. Is This THE House?
The first consideration when deciding if you should buy points is how long you plan to stay in the same house. Is this the house that you will retire in? If so, it may be worthwhile to pay points now because it could save you thousands over the course of the loan. But if you plan to stay in the house for just a few years before moving on, points could be a waste of money.
2. Will You Refinance Soon?
Some mortgage brokers get away with selling borrowers discount points, even though the likelihood of refinancing in the near future is high. If you take out a loan and then refinance two years later for an even better rate, it’s almost like moving into a new house—you lose the benefit associated with prepaying the point on the first loan.
3. Do You Have the Money?
Another more obvious question to ask yourself when deciding if you should buy a point is, “Do I have the cash to do so?” In many cases, you have to pay for discount points out of pocket at closing. Decide if you can afford to pay the extra money now or if you would rather save the cash for other needs, like buying furniture for your new house.
Run the Numbers
Now that you’ve pondered these questions, take a moment to run the numbers. Pull up an online mortgage calculator and run two hypothetical loans—one at the proposed interest rate without points and one if you do pay the points. Look at the total interest you’ll pay in both scenarios, then look at the amortization charts for both. At what month in time does paying the point benefit you? Use this information to make your final decision.
Latest Blog Posts
Are you considering moving this season? If so, you’re going to want a copy of the Fall Buyer and Seller Guides. These guides give you the facts on the biggest trends in the market, expert
Mortgage Rates Fall to 2 Week Lows After Chairman Powell's Message at Jackson HoleFederal Reserve Chairman Jerome Powell recently indicated that the central bank is preparing to cut interest rates
How Mortgage Rate Changes Impact Your Homebuying PowerIf you’re thinking about buying or selling a home, you’ve probably got mortgage rates on your mind. That’s
Massachusetts MLS Property Info Network (MLSPIN) - The property listing data and information set forth herein were provided to MLS Property Information Network, Inc. from third party sources, including sellers, lessors and public records, and were compiled by MLS Property Information Network, Inc. The property listing data and information are for the personal, non commercial use of consumers having a good faith interest in purchasing or leasing listed properties of the type displayed to them and
IDX information is provided exclusively for consumers personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Information is deemed reliable but is not guaranteed. © 2026 State-Wide Multiple Listing Service. All rights reserved.
