The Home Mortgage Help Source
By Ron Kerwood


Weekly Update


The Process




VA Loans

(Rough Credit)





Whether or not to pay points is a question that brings up a few more questions if you're going to make the right decision.

First of all, you need to ask yourself how much you can afford to spend for points.  Each point is typically one percent of the mortgage amount.  That's $1,000 on a $100,000 mortgage.

Secondly, you need to ask yourself how much your budget allows for a mortgage payment.  Each point you pay will decrease your interest rate approximately 1/4% on a 30 year mortgage.  Each drop of 1/4% in your rate will drop your payment approximately $16.00 a month on a $100,000.00 mortgage.

Finally, you need to ask yourself how long you expect to keep this mortgage.  You could spend $3,000 for 3 points on a $100,000 loan and drop the monthly payment approximately $49.  If you only intend to keep the mortgage for about 3-4 years, this may not be the right approach.  Remember, you're paying $3,000 to save $49 a month.  Therefore it takes about 61 months or about five years to recover the cost of the points. (A little less actually since points are generally tax deductible.)

So, did you really save anything if you only have the mortgage for 3 - 4 years?  On paper... not really!  However, if it made the homeownership experience much more comfortable it may have been good for you anyway!

On the other hand, if you expect to keep the mortgage say, 10-15 years or more, you can see that the savings start to multiply nicely the longer you're there.  In the end, the longer you expect to keep the mortgage the more it pays to pay points for a lower rate!!!

Get the Point!?!