Making a Point-How Mortgage Loan
Points Work
A point is a one-time, up-front fee charged by lenders-usually 1% of the total loan amount per point-that reduces your interest rate throughout the life of the loan.
Are Points a Good Choice for You?
Purchasing points can be a good choice depending on how long you keep your mortgage loan. Because your interest rate is lower with points, your corresponding monthly payment is lower as well. Many lenders recommend that you need to keep your loan for at least four years to recoup the cost of the points through your lower monthly payments. There may be tax benefits also, because points may be deductible as home mortgage interest if you itemize deductions. Check with your tax advisor to see if you qualify.
If you think you'll move or refinance in less than four years, however, then a no-point loan may be a better choice. Use online calculators, like those available on Western's online mortgage loan application, to determine the benefits and the impact that points have on your monthly payments.
