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 and Better Money Habits uses a chart illustrating points using a loan amount of $200,000. It’s possible to buy the points down to ensure the interest rates are low when you’re getting the loan. Buying 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. Generally, points are deductible. 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 $200,000 and you buy two points, you will owe an additional $4,000 at closing. Further related to taxes and property ownership is that once you own a house, you’re a property owner obligated 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. When buying a house, your attorney will calculate the total amount of taxes, as well as the number of days in a property tax year that you were the owner of the said property and escrow that amount plus the pro-rated amount from the seller from the part of the year that they owned it. People have been known to spend months looking for the best possible home and eventually find a good one. However, many of these individuals fail to understand the importance of finding a good loan. In the end, the new homeowner has a nice home, but
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