What Are Mortgage Points?
If you’re a first-time home buyer, the closing process can be a confusing collection of factors and terms. However, when going into your first mortgage transaction, it’s important to be familiar with the many different aspects of the process. One of the more unfamiliar concepts in the mortgage process is mortgage points.
A Breakdown of Mortgage Points
Depending on your financial situation, mortgage points can work very well in your favor as you can use points as a trade for interest on your mortgage. Generally speaking, one point is 1% of your loan amount. Therefore, if you borrow $150,000, one point would be $1,500.
When you opt to buy mortgage points, you are “purchasing” a lower interest rate on your loan than if you did not opt to buy the points. However, one point does not equal a 1% deduction in your interest rate. For example, that one point may equal a quarter of a percent reduction of your interest rate.
Although buying mortgage points means a higher up-front closing cost, it can potentially save you big in the long term, often saving borrowers thousands of dollars.
Are Mortgage Points Right for You?
You are in no way obligated to purchase mortgage points in your real estate transaction. If you are in the financial position to do so, it can be quite beneficial. However, if you need assistance with closing costs, you might consider asking for a lender credit to ease up on closing costs in exchange for a slightly higher interest rate.
Rely on the Professional Mortgage Services of Butler Mortgage
If you are unsure where you stand on possibly being able to purchase mortgage points in your home purchase, contact the professionals at Butler Mortgage. For over 25 years, Butler Mortgage has worked with both first-time and seasoned buyers wanting to own a home in not only Central Florida, but throughout the state. Our mortgage experts can review your options and help you secure a desirable mortgage rate that fits your budgetary needs.
Let us help you find the right loan solution for you by calling 407-931-3800 or by filling out our free consultation form online.