I want to refinance my house and they ask me for points options what is that?

Kindra
The options are:0 points0.1-1 points1.01-2 pointsAll listings

Alysia
The vast majority of people that pay discount points regret it.The points buy down your interest rate. 1 point costs 1% of your loan balance. If you refinance 2 years from now or sell your house (and thus pay off the loan) 2 years from now, you do not get your discount points back and the money is wasted. Even if you keep the loan for the full term there is some thought that the lost use of that money is still a very expensive way to reduce your monthly payments.Most people don't actually keep the same loan more than seven years.

Conrad
What the above person said is right, you should take them because it loweres the interest rate...BUT, if it is a short term loan, or the loan is not that large, paying for a lower interest rate may be more expensive than simply taking the higher rate. Not likely, but you should review the different scenarios with your lender. Also it is paying more now, so you pay less later. If you have less now, it sometimes hurts your current situation too much.

Cornelius
Points are sort of a built-in prepayment penalty without calling it that. It is under the guise of getting a lower interest rate. But from what I have seen, points plus interest over the full term of the loan typically adds up to the same dollars as interest with no points. So points end up paying some of the interest in advance.Not sure if that is a tax deduction advantage if you pay the points at closing, but the amount you pay for points could otherwise be used for a larger down payment, which might end up with same monthly payments with more deductable interest per year after the year you refi'd.

Doreatha
oksy points are where you can pay a 1, 000 and that is one point for every point that you buy that is one point off of your interest rate so lets say they offer you 8% well now your loan will be base off of 7% buy as many as you can

Hien
Points are prepaid fees the lender charges to hit certain yield requirements. Paying points should reduce your note rate. It is not 1 to 1. In other words, 1 point does not reduce the rate by 1 percent. If that were so, everyone would pay 6 points right now and get a zero percent note rate. Usually 1 point will buy the note rate down by around 1/4 percent. Points can be a good or bad deal, depending on your situation. The benefit of points is they lower the rate and thus the payment. So if you're in the loan long enough the lower payment will pay you back for the cost of the upfront points. see? If you sell or refi before the benefit is felt, you lost money on the deal. It's a little complicated, probably more than I cover here, but not rocket science. Contact me directly if you want more info.www.ahdevito.com