To buy points or not to buy points? If you plan on having your loan for a while then you want to put more money down, buy some points, and get a lower interest rate. Even if you don’t know how long you’re going to have your loan due to moving or refinancing, paying points at the start might be a good idea. A lower interest rate is almost always a good idea unless you definitely plan to move in 2 or 3 years.
Adding Points Lowers Your Interest Rate
One point means 1% of your total loan that will be paid next to your down payment. Think of it as adding to your down payment. Adding points lowers your interest rate. You are paying the money now rather than later. Even a one point loan will have a lower interest rate than a no-point loan. You can also pay fractions of points if that’s all you can reasonably pay.
If you are considering a career change or a decrease in income, talk to your lender about finding the exact right adjustment of loan to make the loan fit your lifestyle. Points are usually a good idea if you are not moving soon.
You Have A Right To Know The APR
There are many different rates and point combinations that the lender should go through with you. You want to check out a lot of different loan programs and not just the rate. Remember that lenders must publish their Annual Percentage Rate (APR) by a federal law requirement. The APR compares rates, points and terms that different lenders are offering.