May 30th, 2018 7:00 AM by Jackie A. Graves
You've done your financial due diligence
and now you're ready to buy your dream home. Next on your list – getting a
mortgage. While shopping for the right mortgage, you'll probably be offered the
option to buy "discount points." Those points affect your mortgage
interest rate and ultimately your monthly mortgage payment.
In our homebuying glossary we learned that a
mortgage rate is the interest rate you pay to borrow the money to buy your new
home. Mortgage interest rates play a big role in how much house you can afford
and how much you pay for your monthly mortgage payment. Shopping around for the
best mortgage rates can also save you a lot of money.
shopping around, lenders will offer you the option to buy one or more discount
points. Discount points are points you can pay to your lender to buy down your
mortgage interest rate. Each discount point equals 1% of your loan. Buying
points allows you to lock in a lower interest rate on your mortgage. A lower
interest rate typically means you pay a lower mortgage payment.
this down a bit further. On a $200,000 30-year fixed-rate mortgage at 4.25%, 1
discount point would cost you $2,000 and reduce your interest rate about .25%,
depending on the lender. That translates into a $29 savings on your monthly
mortgage payment. This does not include insurance or taxes.
Check out our
infographic below for more tips and info to help you decide.
Visit My Home by
Freddie Mac® for more information
on the homebuying process and be sure to follow our Spring Homebuying blog series.
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