How do paying points effect my mortgage rate?

Mortgage points or origination points are fees paid as part of your closing costs on your loan. Discount points are paid in exchange for getting a lower interest rate on your loan. Each discount point that you pay will reduce your interest rate on your loan by approximately 0.25%. Each point costs 1% of the amount borrowed. For example, if your mortgage that you are borrowing is $225,000, one point would cost $2,250.

If you have the option to pay additional points to lower your interest rate on your mortgage, you should consider how long you plan on keeping that mortgage. Usually the break-even point of the points is about five years, so if you plan to keep the mortgage for a decade or more it may be worth paying.

Ask your loan officer how much the points you would pay would save you per month then divide this by the cost of the points to find out how long you would have to keep the mortgage. For example, if one point costs $2,250 but would save you $50 per month, it would take almost 4 years to break even. If you plan on selling the house in 3-5 years it may not be worth buying down your interest rate. For complete mortgage loan program details and to find out if you qualify, contact us today at 888-488-3807 or go to www.OneTrustHomeLoans.com.

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