When you’re shopping for a mortgage, you may come across the term “mortgage points” or “discount points.” These can be a smart way to lower your interest rate and save money over the life of your loan, but they’re not always the right choice for everyone. Here’s what you need to know.
What Are Mortgage Points?
Mortgage points are fees you pay upfront to your lender at closing in exchange for a lower interest rate on your loan.
How Do They Work?
When you buy points, you will have:
- Higher upfront cost at closing
- Lower monthly payments for the life of the loan
- Potential long-term savings, especially if you plan to stay in the home for many years
The question to ask yourself: Will you keep the loan long enough to recoup the cost of the points? This is called the break-even point—the time it takes for your monthly savings to equal what you paid upfront.
When Does It Make Sense to Pay for Points?
Buying points can be a smart move if:
- You plan to stay in your home for a long time
- You have extra cash available at closing
- You want to reduce your monthly payment and total interest
It may not make sense if:
- You expect to sell or refinance in a few years
- You’re short on cash for closing costs
- You’d rather use funds for other expenses like home improvements
Ready to explore your options?
Contact one of our Mortgage Representatives today to assist you in meeting your homeownership goals!
Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Terms, qualifications and other restrictions apply. Member FDIC, Equal Housing Lender. RCB Bank NMLS #798151.
