Points or No Points?

Kent sez: "Paying points is in essence a trade off between paying money now versus paying money later."

What are points?

Points are interest fees paid on a loan that reduces your monthly interest rate by requiring prepayment of a small percentage of the total interest due. The number of points owed is up to your lender.  For instance, a one-point loan will always have a lower interest rate than a no point loan.  Each point equals 1% of the total loan amount.

So are points good or bad?

It depends on how long you are looking to keep the loan.  We suggest paying points up front if you plan on keeping the loan for at least four years to ensure that you recoup the costs through lower monthly payments. Another benefit to points is that they are tax deductible.

However, if you think that you might move within the next four years or might want to refinance because the market rate is declining, then you probably would be better off with a no point loan.

If the team at AV HomeConsultants can help answer any other questions you might have, please don't hesitate to give us a phone call or send us an email.  We are happy to help in any way that we can to make buying or selling a home as easy for you as can be.