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.
What are home loan points and how do they help a homeowner?
Home Loan Points Basics
The basics are easy to understand, especially if you’re a quick learner. Simply put, home loan points are something that you purchase when you’re getting a mortgage to lower your interest rate.
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.
One thing people want to know is if home loan points are worth the fuss, making a real difference or are they more hype than anything else.
These questions are all good ones that you can’t find answers to very easily.
Are home loan points really worth the time?
This is the question that home owners struggle with. Can they afford the extra money… and is it really worth it, in the long run, to hassle with any sort of points?
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 these home loan points there anyway?
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 benefit, and the loan company benefits, because they get more money up front, something that’s important to them. Most of the time, though, loan companies leave home loan points as optional.
Bottom Line…
The bottom line is that home loan points can help you, but you don’t need them. It’s up to your situation, and extra money – so choose wisely, and carefully.
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.
Tags: Loans