Most people sort of stare at me when I talk about home loan points. Why? Well, the majority of those I come into contact with - even those that own their own home - are actually not aware of what home loan points are. But home loan points can help you do so many things, and in the end, pay less each month on your mortgage payment.

What are home loan points and how do they help a homeowner?

The Basics of Home Loan Points

The basics are not hard to understand if you are a fast learner. Home loan points are something that you buy so that you will get a lower interest rate on your mortgage.

These home loan points are 1% of your loan so you may only be talking about $1000 out of a $100000 loan. You can normally get these home loan points and get a lower interest rates.

But… are home loan points really worth it? Do they make that much of a difference? Why are they there at all?!

This is something important to understand, which we have addressed for you.

Are home loan points really worth the time?

This is the question that home owners struggle with. Can they afford the extra money… and is it really worth it, in the long run, to hassle with any sort of points?

The answer to this is that it depends on your situation. In addition, the answer would be based on the type of mortgage loan, as well as the bank or lending institution being used. More importantly, you need to determine if you have extra funds to buy points and if so, what would the overall savings be.

For instance, if you find that your monthly mortgage payment will go down by as much as $50 and you have some extra money available to buy points, then home loan points could be highly beneficial. In this case, while there is a little money upfront, the long-term savings are tremendous.

Then, you might ask why home loan points exist in the first place.

Not only are home loan points here to help you pay for a better long term loan, but they’re there to let you have the choice. You can pay more now, and get a lower interest rate, but if you don’t have the money, that’s okay, too - you still get a decent loan.

You will benefit and the loan company will to because they are getting more money up front and that is important to them. Loan companies will leave home loan points as just an option.

Summary

The bottom line is that home loan points can help you, but you don’t need them. It’s up to your situation, and extra money - so choose wisely, and carefully.