I often hear from new home buyers who were given Good Faith Estimates which included 1 or 2 mortgage discount points.  If you are searching for mortgage financing when acquiring your new home or regarding mortgage refinancing; remember that paying discount points is solely your decision.  If you come across a mortgage company or bank that didn’t provide their lowest interest rate, without charging discount points; I’ve got great mortgage advice.  Call the mortgage loan officer and ask what would the interest rate be if you chose not to pay the proposed discount points.  This is never asked by consumers when shopping for mortgage loans and it’s a very fair question that needs an answer.

Remember discount points are reserved for you to consider to pay and buy down your interest rate.  Your biggest financial concern is the recover period involved.  In most cases paying one discount point or 1% of the loan amount will buy down your interest rate by 0.25%.  When you divide the amount of motnhly savings by the amount of the discount point paid you are calculating the recovery period.  The recovery period is important because you want to make sure you at least recover the money you paid.  Discount points are simply an interest payment in advance to the bank.

As always call a mortgage professional and unlock the mysteries surrounding discount points and make a better informed decision.

Stephen Thaggard

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