What are Points and Why Would You Want to Buy Them?

Loan points are also known as“buy-down” or “discount points”.These are up-front fees the borrower pays to the lender at the close of escrow to buy-down or lower the interest rate over the life of the home loan.

Each point is equal to one percent of your total loan amount. So, if you are taking a $150,000 loan, one point would equal $1,500. The more points you buy, the lower your interest rate for the loan will be, but because you have to pay point fees at the close of escrow, you will need more money at closing.

How do you decide whether you should buy points or not? The general rule of thumb is that it depends on how long you plan to live in the home, but other factors should also be considered.

For help with understanding how points work and whether or not it is in your best interest to buy points, contact Eddie Perez, Broker-REALTOR, CDPE. Eddie’s market includes Hoboken, a progressive city where they’re always coming up with new ways of making it a better place to live, Jersey City, Weehawken and Union City. Eddie can also be reached by phone at 201-344-2886.