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What are Home Loan Points?

May 24, 2008
Many people don't know anything about home loan points, even those that may own a home. They just are not sure of what home loan points are. Having less home loan points can help you with many different things so that you will end up paying less on your mortgage.

What are home loan points and how do they help a homeowner?

Home Loan Points Basics

It is actually quite easy to understand home loan points. In a nutshell, these points help you get a lower interest rate when it comes time for you to purchase a new home.

These home loan points are 1% of your loan so you may only be talking about $1000 out of a $100000 loan. You can normally get these home loan points and get a lower interest rates.

But you may not know if home loan points are really worth it. Do they make a bigger difference and why are they even there?

These questions are all good ones that you can't find answers to very easily.

Are Home Loan Points Really Worth It?

In other words, you might want to know if you can afford spending more money for the points and if you do, will you expect to get something out of it in the end and without a lot of hassle.

The answer to this is that it depends on your situation. In addition, the answer would be based on the type of mortgage loan, as well as the bank or lending institution being used. More importantly, you need to determine if you have extra funds to buy points and if so, what would the overall savings be.

If you are going to be saving as least $40 a month then you should take home loan points into consideration. The savings will outweigh the disadvantages and the payments that you may have upfront.

Why Are Home Loan Points There At All?

Well, remember that in addition to helping you with paying a long mortgage loan, they also provide you with many opportunities. For example, you would have the chance to pay more now while securing a lower interest rate. However, even if you find you do not have extra funds, you can still secure a good loan.

Additionally, while you enjoy many benefits so does the loan company. The reason is that they get the money you pay upfront for the home loan points, which is why they are in business in the first place - to make money. Typically, these companies make the points an optional thing.

Bottom Line...

These home loan points can help you but your don't have to have them. It's up to you and your money situation. Be wise and careful.
About the Author
Home loan points can help you, though they are optional. It's up to your situation, and extra money - so choose wisely, and carefully to benefit. Low Income Home Loan
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