What Are Points on a Mortgage
When Should I Pay Them?
Does it make sense to pay mortgage points? Well, that depends on your goals for the loan. If you’re planning on keeping the loan at least 5 to 7 years, it can sometimes make sense to pay extra points for a lower rate. However, if you know you won’t be in the loan that long, it’s usually better to keep your costs lower and avoid paying points. If you pay one or two points to get a lower rate and only keep the loan a few years, you’ll likely end up paying more for the mortgage than you need to. To see how points impact the lifetime cost of a loan, check out the three 30-year fixed loan scenarios in the table below. The option on the left offers zero points but has the highest interest rate. The option in the middle has a slightly lower rate with one point, and the option on the right has two points and the lowest interest rate.Those savings are accumulated over a 30-year period.
