{"id":97127,"date":"2023-02-02T15:37:55","date_gmt":"2023-02-02T22:37:55","guid":{"rendered":"https:\/\/citycreekmortgage.com\/?p=97127"},"modified":"2025-11-21T11:30:57","modified_gmt":"2025-11-21T18:30:57","slug":"buying-mortgage-points","status":"publish","type":"post","link":"https:\/\/citycreekmortgage.com\/blog\/2023\/02\/02\/buying-mortgage-points\/","title":{"rendered":"Buying Mortgage Points"},"content":{"rendered":"

If you\u2019re buying a house for the first time, you might come across items you\u2019re unfamiliar with. Items like Private Mortgage Insurance, FA vs. Conventional Loans, or what is included in the closing costs<\/a>. Paying mortgage points (“points”) on your mortgage might not be the first thing you think of when shopping for your mortgage, but knowing what points actually are, is vital to saving money at the closing table.<\/p>\n

What Are Mortgage Points?<\/h2>\n

Mortgage points are a fee you can pay to lower the interest rate on your mortgage. Buyers are always looking for ways to get a lower interest rate (which also means getting a lower monthly payment). With the Fed raising interest rates<\/a>, buyers’ main tools are waiting for rates to drop, or buying the rate down by paying mortgage points.<\/p>\n

\"Point<\/p>\n

Essentially you’re paying the lender money upfront in exchange for a lower interest rate. Mortgage points are sometimes called \u201cDiscount Points\u201d or \u201cRebate Points\u201d<\/p>\n

Each mortgage point is 1% of your total loan amount, which can lower your interest rate from 1\/8% to 3\/4% depending on what the lender is offering.<\/p>\n

For example: if the lender is offering you 0.25% off your rate for paying 1 point, for a 30 year, $300,000 loan with a 6.5% interest rate, you could drop your rate to 6.25% by paying $3000, and your monthly payment would drop from 1,896.20 to 1,847.15 saving you $49 a month.<\/p>\n

Different Types of Mortgage Points<\/h2>\n

There are two types of mortgage points: Origination and Discount Points.<\/p>\n

Origination Points<\/strong><\/p>\n

Origination points or origination charges are the lender fees that are charged for the closing of a loan. These points are used to cover the overhead costs for the loan. Origination points do not lower the interest rate on the loan and are a one-time fee paid when you close. Origination points are generally between 0.5%-1.5% and are included in your closing costs<\/a>.<\/p>\n

Discount Points<\/strong><\/p>\n

Discount points, aka \u201cpoints,\u201d are a one-time fee you pay your lender to lower your interest rate. Points are purchased at the sale of a home or when you refinance a home.<\/p>\n

\"Mortgage<\/p>\n

Are Buying Mortgage Points A Good Deal?<\/h2>\n

Your situation will determine if buying mortgage points is a smart move. If you move frequently and might have to sell your home relatively soon after purchasing it, buying points might not be a great option for you. However, it might be a good option if you\u2019re planning to own the home for over five years.<\/p>\n

Benefits<\/strong><\/p>\n

When you buy mortgage points, you\u2019re lowering the rate on the loan and the overall cost of the loan. Paying 1 point could end up saving you $10,000\u2019s over the life of a 30-year mortgage, if you keep that exact loan. Which means if you don\u2019t refinance. Mortgage points can be a great option for homebuyers with extra to put towards their purchase, if they are planning on staying in that home with the same loan for a few years.<\/p>\n

When to Pay Mortgage Points<\/strong><\/p>\n

There are some instances where buying down your rate is a smart decision. A small upfront cost can save you tens to hundreds of thousands of dollars over the course of your loan.<\/p>\n