Should I pay points to lower the rate?

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Should I Pay Points to Lower the Rate

As your trusted partner in helping you navigate the complex world of mortgages, we’re here to guide you through the home buying process and help you make informed decisions.

Understanding Points: What are They?

As a homebuyer, you may have come across the term “points” when exploring mortgage options. Points, also known as discount points, are an upfront fee paid to the lender at closing in exchange for a lower interest rate on your mortgage. Each point typically costs 1% of your total loan amount.

Should You Pay Points to Lower Your Mortgage Rate?

Deciding whether to pay points can be a crucial financial choice that can impact your long-term savings. To make an informed decision, it’s essential to weigh the pros and cons. Here are some key factors to consider:

Pros of Paying Points:

  • Lower Monthly Payments: By paying points, you can secure a lower interest rate, resulting in reduced monthly mortgage payments.
  • Potential Long-Term Savings: Over time, the lower interest rate can lead to significant savings on your total interest payments throughout the life of the loan.

Cons of Paying Points:

  • Upfront Costs: Paying points means you’ll have to make an upfront payment at closing, which can increase your initial out-of-pocket expenses.
  • Break-Even Point: It’s important to calculate the “break-even point”—the point where your monthly savings from a lower interest rate offset the upfront cost of paying points. This will help determine how long you need to stay in the home to recoup the upfront investment.

Ready to determine if paying points is the right choice for you?

To help you with this decision, we’re providing a calculator that allows you to evaluate whether paying points makes financial sense based on your circumstances. By inputting key variables such as loan amount, interest rate, and desired discount points, the calculator will provide you with a clear analysis of your potential savings and break-even point.

 

Trust in BankSouth Mortgage, where expertise meets excellence in service. Let us guide you on your path to affordable homeownership! Take the first step toward maximizing your savings on your mortgage journey. Get pre-approved today!