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| Points |
Pay Points is when you pay the bank/lender for a lower interest rate.
Why? By paying points, you will get a lower interest rate which will give you a lower monthly payment. This is good if you are going to have the mortgage for a long time. If you think that you will move and/or refinance within 10 years, then points will NOT be to your advantage in the long run.
Definition One point is equivalent to one percent of the loan amount. Mortgage points are considered by the IRS to be a form of pre-paid interest. This means that mortgage points can be deducted from taxable income. Most lenders require that a borrower pay one or two points at closing time in exchange for a lower mortgage rate (lender's APR would stay the same).
www.kaystratton.com/financingdefinitions.html
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