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Rates Versus Points
What is a Point?
A point is a fee equal to 1% of
the loan amount. You may elect to pay points
to obtain a lower interest rate.
What Does this Mean for
You, the Borrower?
If you choose a program with points,
you will be required to pay them at closing.
This increases your overall out-of-pocket closing
costs. You will however, benefit from a lower
interest rate and lower monthly payments (of
principal and interest) over the loan term.
This is beneficial if you have the cash on hand
and are planning to own the property for a long
time.
Some Considerations When
Looking at Rate/Point Combinations
You Will Benefit from Paying Points
When:
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You need a lower rate to
qualify
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You plan to keep the property
for a long time
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Someone else is willing
to pay point cost (the seller or your company)
Paying Points is Less Advantageous
When:
-
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You are planning on selling
the property in a short period of time
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You think that you might
refinance within a short period of time
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