All About Home Loan Points
May 23, 2008
Most people sort of stare at me when I talk about home loan points. Why? Well, the majority of those I come into contact with - even those that own their own home - are actually not aware of what home loan points are. But home loan points can help you do so many things, and in the end, pay less each month on your mortgage payment.
So, what are home loan points - and how can they benefit you, the potential home owner?
The Basics of Home Loan Points
It is actually quite easy to understand home loan points. In a nutshell, these points help you get a lower interest rate when it comes time for you to purchase a new home.
Home loan points are basically 1% of your loan - so, if you′re taking out a loan of 100,000, one point would be about $1,000. Many times, you can buy these home loan points, and lower your interest rate.
But you may not know if home loan points are really worth it. Do they make a bigger difference and why are they even there?
Good questions, actually, and questions you can’t find answers to easily.
Are Home Loan Points Really Worth It?
This is what a lot of home owners struggle with because they are not sure if they can afford the extra money and if it will really help in the long run.
The answer to this is that it depends on your situation. In addition, the answer would be based on the type of mortgage loan, as well as the bank or lending institution being used. More importantly, you need to determine if you have extra funds to buy points and if so, what would the overall savings be.
For instance, if you find that your monthly mortgage payment will go down by as much as $50 and you have some extra money available to buy points, then home loan points could be highly beneficial. In this case, while there is a little money upfront, the long-term savings are tremendous.
Why Are Home Loan Points There At All?
These are there really to help you pay for a better long term loan and to let you have a choice. You may pay more up front, but you will have a lower interest rate and you don’t have to worry about it. You′ll still get a decent loan.
You will benefit and the loan company will to because they are getting more money up front and that is important to them. Loan companies will leave home loan points as just an option.
Bottom Line…
These home loan points can help you but your don’t have to have them. It’s up to you and your money situation. Be wise and careful.
Looking for a loan that offers home loan points as an optional? Go to Low Income Home Loan, and see the impressive rates and service that can offer you.
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