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Most people sort of stare at me when I talk about home loan points. Why? Well, the majority of those I come into contact with - even those that own their own home - are actually not aware of what home loan points are. But home loan points can help you do so many things, and in the end, pay less each month on your mortgage payment.

Okay, we will discuss what home loan points are, as well as the many advantages they offer specifically to someone wanting to buy a home.

The Basics of Home Loan Points

The basics are easy to understand, especially if you’re a quick learner. Simply put, home loan points are something that you purchase when you’re getting a mortgage to lower your interest rate.

In other words, look at home loan points as being equal to 1% of your mortgage loan. Therefore, if you were going to take out a mortgage loan of $200,000, you would have $2,000 in points. Often, home loan points can also be purchased, which help by reducing your current interest rate.

But… are home loan points really worth it? Do they make that much of a difference? Why are they there at all?!

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

First, if you want to know if home loan points are actually worth it.

This is what a lot of home owners struggle with because they are not sure if they can afford the extra money and if it will really help in the long run.

It can depend on your situation and the type of loan and the loan company your looking at. The big question is do you have the extra money to spend on the points and how much are you going to save?

If you’re going to be saving more than $40 a month, and you have the extra money to put down on points, you should seriously take your home loan points into mind. The savings can greatly outweigh the disadvantages, and upfront payments.

Then, you might ask why home loan points exist in the first place.

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.

The Bottom Line Is

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.