Is it worth to buy down points for your mortgage?

Is it worth it to buy down points on your mortgage?

 
While the mortgage interest rates seems to be coming down since the start of 2024 (finally!), it still appears high to a lot of the buyers after seeing the 3-4%’s in the past year.  (But remember, historical average is 8%!) 
 
I have been inquired about whether if it’s wise to ‘buy down some points’ when getting a mortgage, so I reached out to one of our partner lenders for some inputs to share with you. 
 
1. How much is a point? 
 
A point usually equals to 1% of your base loan amount:  For example, if you are approved for a loan of $200,000, then a point would $2000. 
 
You will bring this amount of cash to closing, and a point will generally bring down about quarter percentage of your interest rates – So if your fixed interest rate on the mortgage is 6%, then it will be 5.75%. 
 
Please note: Above numbers are for your reference based on general guidance, and is subject to change. 
 
2. Is it worth buying down the points? 
 
As you can see, buying down the points may not be as drastic impact on the interest rates, and  what’s most important is to know how much will you be paying on monthly mortgage.
 
If you are willing to spend few thousand dollars to bring down the points, it may make more sense to use the money to put in more down payment to lower your monthly, or save the cash to add some home updates or do repair.  
 
Also, you can refinance your loan in a year or two, which usually is a couple of thousand dollars, so you may save the cash for it as well. 
 
Our lender partners are extremely helpful, and I’d be happy to give you more info and guidance as needed! 
 
Please feel free to reach out to me for any assistance. 

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