Home Selling Team
Sue Esposito, Home Selling TeamPhone: (860) 428-3201
Email: [email protected]

Mortgage points: What they are and how they can help

by Sue Esposito 09/18/2024

Mortgage points can be a confusing topic, especially if you’re not familiar with them. And while they are hefty in value, the information surrounding them is often overwhelming. So, let’s start with the most basic point: What, exactly, are mortgage points, and why do I need to know about them?

Here’s a quick and simple guide to understanding the “what” and “why” of mortgage points:

What are mortgage points?

When your lender, loan officer or real estate agent brings up mortgage points, it’s best to think of them as discount points. These are typically points, calculated to roughly 1% of your final mortgage, that can be applied to your mortgage interest to bring the overall interest rate down throughout the life of your mortgage loan.

How do mortgage points work?

Mortgage interest rates are typically calculated into your monthly mortgage payment. With mortgage points, you can bring your overall monthly payment down by paying into your interest rates ahead of time.

So, if you have a mortgage of $200,000 with interest rates already calculated in, paying $2,000 up front would grant you a mortgage point, being that it is 1% of your overall mortgage balance.

Why do I need to know about mortgage points?

While it may seem easier to simply pay your monthly payments, and for some it’s the ideal choice, you may want to consider mortgage points if you’re searching within a market with slightly higher interest rates.

Likewise, if you’re planning to stay in your home long enough to watch your prepaid interest pay off in the long term, mortgage points may also be worth investing in.

Mortgage points can raise your overall closing costs by a significant amount. However, based on your unique circumstances, the bulk closing costs may be worth it if you’re interested in decreasing your monthly payments for the overall life of the loan.

Still have questions? Try connecting with your loan officer, lender or real estate agent to help guide you through the process.

About the Author
Author

Sue Esposito

There are many qualities and skills that go into being an excellent real estate professional - integrity, in-depth community and market knowledge, marketing savvy, effective negotiation skills and a high-quality professional network, all of which are hallmarks of how I work.

  • Full Time Real Estate Professional with an excellent work ethic
  • 32 years of real estate experience working with a diverse client base of both buyers and sellers
  • Certified Real Estate Negotiation Expert
  • Passionate about the Real Estate profession and advancing education and skills
  • Proficient with technological advances in marketing strategies
  • Employs a Full Time Licensed Real Estate Listing and Transaction Manager
  • My Designations include Broker, ABR, CNE, CRS, GRI, MRP, SFR, and SRS. 
  • Licensed in CT