decrease your monthly mortgage payments.
One point costs 1% of your mortgage amount (or $1,000 for every $100,000). Essentially, you pay some interest upfront in exchange for a lower interest rate over the life of your loan. In general, the longer you plan to own the home, the more points help you save on interest over the life of the loan. For example, Bank of America, Better Money Habits, uses a chart illustrating points using a loan amount of $100,000. It’s possible to buy the points to ensure the interest rates are low when you’re getting the loan. Buying the points can help you down the line by guaranteeing that you save money, especially if you plan to stay in the house for an extended period. However, the amount of cash you’ll save by buying the points depends on the number of points you buy. For instance, if your mortgage is $100,000 and you buy two points, you will owe $2,000 additional when closing. Further related to taxes and property ownership is that once you own a house, you’re a property owner, with the attendant obligation to pay property taxes. The usual method of paying property taxes is to escrow the amount of annual taxes within the mortgage payment. The mortgage servicer will pay the taxes as they are due. If you are financing with at 20% or more, you’ll have the option to pay the property taxes yourself but, you must be very disciplined to put aside every month 1/12 of the total property taxes due, otherwise you can have a big surprise at tax time. When buying a house, your lender will calculate the total amount of real estate taxes as well as the number of days in a
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