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.

So, what are home loan points - and how can they benefit you, the potential home owner?

Home Loan Points 101

The basics are not hard to understand if you are a fast learner. Home loan points are something that you buy so that you will get a lower interest rate on your mortgage.

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?

Good questions, actually, and questions you can’t find answers to easily.

Are home loan points really worth the time?

This is the question that home owners struggle with. Can they afford the extra money… and is it really worth it, in the long run, to hassle with any sort of points?

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?

For instance, if you find that your monthly mortgage payment will go down by as much as $50 and you have some extra money available to buy points, then home loan points could be highly beneficial. In this case, while there is a little money upfront, the long-term savings are tremendous.

Why Are Home Loan Points There At All?

Not only are home loan points here to help you pay for a better long term loan, but they’re there to let you have the choice. You can pay more now, and get a lower interest rate, but if you don’t have the money, that’s okay, too - you still get a decent loan.

You benefit, and the loan company benefits, because they get more money up front, something that’s important to them. Most of the time, though, loan companies leave home loan points as optional.

Bottom Line…

In most cases, home loan points can be highly beneficial but they are not required. Choosing to buy these points will depend on a number of factors to include your situation and personal preference, as well as how much extra money you have with which to work.