Talk to Your Loan Officer About Discount Points
A slight decrease in your interest rate equates to great savings over the term of your mortgage
The savings from having a lower monthly payment as well (due to the lower interest rate) can help you break-even on the cost of buying down your rate over a number of months.
Take the cost of buying down your rate and divide by the difference in monthly payment (between the old interest rate and the new lower one) and you are left with the number of months it will take you to break-even on the cost of buying down your rate
If you plan to stay in your home beyond the breakeven point and don’t think you’ll refinance before the breakeven month hits, paying points may be a good idea. This can be great for individuals who plan to live in a home for more than 7-10 years.
- Market interest rates have been steadily rising since January 2018
- Tightening of home supply in the state of Georgia
- Home prices have risen in the same time period
- “Discount Points” are fees paid directly to your lender at closing in exchange for a reduced interest rate
- Also known as “buying down your rate”
- Your lender can use money from seller-paid contributions to buy down your rate or use your own assets
- *The IRS considers discount points to be prepaid mortgage interest, so discount points can be tax-deductible. (*THIS STATEMENT DOES NOT CONSTITUTE TAX ADVICE)
For more guidance on the mortgage process, discount points, and more…please consult your loan officer today!