Benefits of Mortgage Points That can be Gained by Borrowers
Varying charges are incurred on mortgage loans. Mortgage Points are among these many fees. The classes for mortgage points are two, origination and discount points. A point equals 1 percent of the loan amount. Although origination points give an advantage to the lenders in most cases, the borrower also stands to gain something from discount points. This article provides some advantages that a borrower can have by having these mortgage points.
A discounted interest rate is a potential benefit. Purchasing discount points serve to prepay the interest payable on the borrower’s loan. The effect of this is that the interest rate that is charged on loan is reduced. The general percentage that can be accrued to a buyer purchasing one mortgage point on the rate of interest to be paid is 0.25 percent. There is, however, no definite rate that is provided as regards the reduction in interest rate, since this can be determined by factors such as your lender and the marketplace. The reduced rate of interest is a beneficial thing to the borrower because it leads to them paying lower for the loan than what they would have paid without the points. A significant difference can be observed over time on what is spent with the discounted interest rate when this is compared with what would otherwise be paid without the lower rate achieved by buying mortgage points. Learn more about what other factors to consider in determining how many results you can have from buying mortgage points in your specific market.
Another benefit of buying points on a mortgage for the borrower is that the total costs of the home are reduced. The greatest observable saving for borrowers who purchase discount points is in the early years of the loan when the amount of interest paid is higher than the principal. However, the long-term savings are still significant.
The other advantage that the borrower can gain is that discount points may be tax deductible. While origination points have conditions to their tax deduction, discount points are deductible at all times. The result of a tax deduction is a reduced amount of interest to be paid on loan. The lower amounts to pay are a relieving experience for borrowers, more specifically vital to them in the earlier years of paying for their mortgage. Learn more about how tax deductions can affect a loan by figures.
The calculations and exact figures of what you stand to gain may be something you can seek professional help for. Learn more about how you can find the help you need. Find more information about reverse mortgages for yourself or your older folks on how does a reverse mortgage work.
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