Mortgage points are the amounts of money paid to the lender at closing. They are paid in exchange for a reduced interest rate. These points normally apply when taking mortgage loans. One of the main advantages of mortgage points is that they will offer you a discounted interest rate. You are able to prepay interest on the loan when you buy mortgage points. In this case the interest rates they are charged on their loans is greatly reduced. In this case they end up paying less for the loans. Buying mortgage points will ensure that you will make lower payments. This is because of the reduction of interest rates. This means the borrower will be able to pay his loans in less years and still enjoy the benefits in many years. This will increase the monthly savings on the part of the buyer.
An added advantage of buying mortgage points is that it reduces the total cost of buying a home. This is due to the fact that the long term savings you will be enjoying will be more substantial. Discounted interest helps in lowering the overall amount. Over the overall life of that loan you will actually be saving more. Another benefit of mortgage points is that they are tax deductible. As long as you apply them to the cost of obtaining the loan they are tax deductible. This can be very beneficial to those buyers who are financially strained. This is especially during their first year of home ownership. You should ensure that you hire or consult a tax professional in this case. A professional will explain in detail all the tax benefits you will be able to enjoy.
Mortgage points can be beneficial to you if you choose a fixed rate mortgage. This is in a case where you are planning to own the home after you have reached your break-even period. This is normally the period you will take to recover the amount of money you spent in buying points. This will help you save more money. If you are planning to own the home for a long time you will save more money on interest rates.
Buying mortgage points will also help you pay less monthly mortgage. Always ensure that you have the cash available to buy points up front. This money should be inclusive of down payment, closing costs and reserves down payment, closing costs and reserves down payment, closing costs and reserves. Refinancing your mortgage can help you save a lot of money. In this case you can save even more when you pay extra for discount. You will be able to benefit a lot from simply buying mortgage points when you decide to take a mortgage loan.