Posted on: 15th Dec, 2009 09:49 am
Please explain how buying points can save me money on the interest of our loan. Also, how many points can I buy. How low of an interest payment can I go? Can I buy 3 points and only pay 3% interest on my new loan???
1 point refers to 1% of the purchase price. The more points you can pay upfront, the lower the interest rate on your mortgage will be. It is up to you how much money you want to pay as upfront points. It depends on your individual situation how much the interest rate will go down if you pay 3 upfront points.
Typically, a point will buy you about 1/4 - 3/8 of a point in the rate.
1 Point = 1% of the mortgage amount. 1 point will buy down the interest rate more on an ARM Product vs. 15 or 30 yr Fixed Mortgage. Find out what you're paying on a zero point quote vs. 1pt, 2pts, & 3pts. If you can recoup the cost of buying down the interest rate (aka prepaying interest)over the first 2-5 years than it might be worth it. It all depends on how significant the savings is and what your plan is regarding staying in that home.
