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The 30 year fixed rate mortgage with no points is typically one of the most common scenarios chosen by homeowners.  Why? It results in lower closing costs which benefits most homeowners.

Most people don’t keep a mortgage for more than 5 to 7 years, so there is no point in having higher closing costs, because by the time you have recuperated those costs, you will likely have either sold your home or refinanced the mortgage.

Who Should Pay Points?

Refinancing

If you plan on selling your home in the near future (5 to 7 years) then it makes more sense not to pay discount points and go with a limited closing cost loan. Otherwise, by the time you recuperate the cost associated with your interest rate, you would have wasted your money/equity in your home.

Purchasers

If you have limited funds and don’t plan on retiring in your home, then you do not want to waste money in buying down the rate with discount points.  You would probably rather opt-in for the lowest interest rate with limited closing costs and keep your money in the bank.

Whether purchasing or refinancing, we can help you determine whether there is a cost benefit to not paying points.