Mortgage & Refinancing Information

Luxury Real Estate Information

Rancho Palos Verdes, California Homes
Palos Verdes, California Homes
South Bay, California Homes
Luxury Mexican Beachfront Homes

Featured Properties

Oceanfront Estate Near Trump National

Related Information

Loan Information
Real Estate Information
Mortgage Refinance Information

Home Mortgages: Does It Ever Make Sense to Pay Points?

Interest rates on home mortgages are often quoted with and without points. A point equals one percent of the amount you are financing. This means that on a $150,000 mortgage, one point is $1500.00 and two points would be $3,000. These points are in addition to whatever other closing costs you might have.

I checked interest rates today in our state for 30-year fixed-rate mortgages and found a number of companies offering mortgages with no points. Here are a few examples (payment and interest only - no taxes or insurance).

0 Points 5.625 percent interest, $863 per month payment

0 Points, 5.750 percent interest, $875 per month payment

0 Points, 6.250 percent interesxt, $924 per month payment

Now, let's compare these with mortgages requiring points.

1 Point, 5.250 percent interest rate, $826 per month payment

2 Points 5.0 percent interest rate, $805 per month payment

2 Points, 5.125 percent interest rate, $817 per month payment

What this makes clear is that there is an inverse ratio between the number of points charged by the lender and the interest rate on the mortgage. In other words, the more points you pay, the less your interest rate will be. This means that when you pay points you are basically buying down your interest rate and, thus, your monthly payment. In fact, one point is usually equal to percent in the interest rate. So, as you can see from these charts, paying two points on a 30-year fixed-rate mortgage could save you as much as $50 a month or $600 a year.

So doesn't it make sense to always pay points?

Not necessarily.

The important thing in deciding whether or not to pay points is the number of years you intend to stay in that house before you either refinance or buy another. Do the math and you will see that the longer you intend to stay in that house, the more sense it makes to pay points.

Let's go back to that two point example where the interest rate is an even five percent and the monthy payment $805. If your best deal in a no-points mortgage is 5.625 percent, yielding a payment of $863, then paying two points will save you $58 a month or $696.00 a year.

However, you must remember that on a $150,000 mortgage, two points equals $3,000. So you would need to say in that house for almost 4.5 years in order to just break even on the cost of the points.

So in answer to the question, should you pay points, the answer is a a strong maybe. If you intend to stay in the same house for seven or ten years, the answer is probably "yes." If you believe you will refinance or sell the home in less than four years, the answer is that you will be money ahead to skip the points and pay the higher interest rate.

For FREE help with debt and credit, subscribe today to Douglas Hanna's free email newsletter "8 Simple Steps to Debt Relief" at

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at

National Mortgage News

Mortgage refinance applications decline to 18-year low: MBA
National Mortgage News
Mortgage applications decreased 1.8% from one week earlier as refinance submissions fell to their lowest in nearly 18 years, according to the Mortgage Bankers Association. The MBA's Weekly Mortgage Applications Survey for the week ending Sept. 7 found ...
Can't Get an Adjustable Rate Mortgage Refinance – ARM Loan Advice for Struggling DebtorsCryptoRecorder

all 20 news articles »

The Mortgage Reports (blog)

Mortgage refinance checklist: what you need to refinance your home
The Mortgage Reports (blog)
Preparation is vital prior to applying for a mortgage refinance. You have to do the math and figure out if it makes financial sense. Plus, you need to learn the facts and shop around. Getting your paperwork in order is crucial, too. Tackling these and ...

ABC News

Mortgage refinance rejection spike exposes number of Australians in debt distress
ABC News
It's being described as a "mortgage mirage". It's an offer from the bank that looks too good to be true and, as it turns out, for many it is. Key points: Surge in refinance applications down to banking reform and the royal commission; It means ...

New Data Outlines Consumer Attitude Shift for the Purpose of Mortgage Refinance Loan from Rate Reduction to ...
Digital Journal
Sep. 20, 2018 / PRZen / BELLEAIR BEACH, Fla. -- Despite increasing rates, consumers remain interested in refinance mortgage loans, but now with a new purpose: pulling out cash from home equity. The Q2 2018 Mortgage Consumer Profile Report, which is ...

and more »

The New Daily

Spike in mortgage refinance rejections
The New Daily
It's being described as a “mortgage mirage”. It's an offer from the bank that looks too good to be true and, as it turns out, for many it is. “About 40 per cent of people who tried to refinance were unable to do so,” Digital Finance Analytics principal ...

How to refinance your mortgage
When considering a mortgage refinance, focus on lowering your monthly payments or interest rate without tacking on more years to repayment, if possible. Check your credit score and history. The higher your credit score, the better refinance rates ...

Equifax: First Mortgage Originations Continue Steady Rise, Reaching over $680 Billion in Total Balance
ATLANTA, Sept. 18, 2018 /PRNewswire/ -- First mortgage originations have continued to show a slight but steady increase, with more than 2.77 million first mortgages originated year-to-date through May 2018, reflecting a total dollar amount of $689.8 ...

and more »

The Mortgage Reports (blog)

Should you leave your 3% rate behind to do a cash-out refinance?
The Mortgage Reports (blog)
Rates: Although today's mortgage refinance rates could be higher than your existing mortgage rate, they still are historically low. Additionally, they are often lower than HELOC rates, which could run one to two percent higher. Timing: A cash-out ...

The MReport

First Mortgages on the Rise
The MReport
Home sales continue to disappoint, due to tight inventories and increased construction costs, but mortgage refinance has been slightly stronger than expected." According to the report, home equity loan originations was up by over 7 percent, but the ...

and more »

The Mortgage Reports (blog)

How should I apply for a mortgage refinance: in person, by phone or online?
The Mortgage Reports (blog)
If Artificial Intelligence (AI) becomes a bit more intelligent, there may be no reason not to apply for a mortgage refinance online. Truly intelligent AI will offer the speed and convenience of today's online applications with the personal service that ...

and more »

Google News

home | site map