Points

Question

Answer
1) What is a point? A point is 1% of the loan amount that is paid upfront. It's essentially prepaid interest.

 
2) Why would I pay a point? When you pay a point, you get a lower rate on your loan.

 
3) How much higher is my rate if I don't pay a point? Usually about .25% higher

 
4) How long will it take me before I start breakeven by paying a point vs. the higher mortgage payment I will pay without a point? A good rule of thumb is about 5 years. After five years, you would have been better off paying the point up front

 
5) What's your opinion? In my experience, nobody has a crystal ball. Chances are you will move, remodel, or refinance within the first five years. That's solely my opinion. So, of course, I think your better off not paying points.

2525 Camino Del Rio South, Suite 101  San Diego, CA 92108 619.702.7918