“Paying Points” to Buy Down Interest Rates

In this interest rate climate, it’s nice to have options for reducing what may otherwise be considered a high-interest rate. This is where “paying points” to buy down interest rates could be beneficial! It’s a great alternative for today’s homebuyers.

What does “paying points” mean?

• “Points” are additional fees a borrower or seller can pay in return for a lower rate. It may be advantageous for a home buyer to pay additional fees at closing to reduce their monthly payments for the life of the loan.
• This fee is a percentage of the loan amount and is known as discount points. One mortgage discount point is equal to 1% of your total loan amount. Home buyers have the option to pay discount points in .125% increments. Sometimes paying the additional upfront can save money over the long haul and help to reduce monthly payments.

Why use it?

• Paying discount points can make sense depending on your budget and how long you plan to own the home. The longer you plan on living in your new home the more advantageous it may be for you. It’s not recommended for anyone that might move relatively soon, decide to refinance, or (should you win the lottery or think you’re coming into a big inheritance) pay off the mortgage.
• Discount points may be negotiated as part of seller-paid closing costs. You heard me! It’s very possible that this can be worked into the contract. It doesn’t happen every time but sometimes sellers are very eager to sell and will accommodate the request.

Paying discount points is an option that could make purchasing a home a reality! You may have just talked yourself into waiting for rates to go down, but instead of waiting, this could be your answer.

Remember that little white house with the carefully manicured hedge and adorable white picket fence calling your name? You should answer! Talk to your local BankSouth Mortgage loan officer today.