Mortgage Q&A: “Are mortgage points good or bad?”
[See how much is a mortgage point for more on that.]
But they’re quite different.
Both of these charges are avoidable, assuming you don’t want to buy down your rate, or if you take out a no cost loan that has no closing costs, only back-end lender-paid commissions.
All that said, mortgage points aren’t necessarily good or bad, depending on which type we’re talking about, and also what the situation is.
Obviously, the less you pay the better, right?
But if you pay less at closing and more over the life of the loan thanks to a higher mortgage rate, you’re not paying less.
So for those who plan to stay in their home for the long-haul and pay off the mortgage, paying mortgage discount points could be considered a “good” move.
Conversely, if you plan to stay in your home for just a short period, or think you’ll refinance again in the near future, paying mortgage points is probably bad news.
When it comes to loan origination points, the less the better. This is essentially just more commission for the originating bank or mortgage lender, so be sure to negotiate hard on those fees.
Sure, the entity originating your mortgage needs to get compensated for their work, but be sure you know how much they’re getting and why.
Read more: How much do mortgage brokers make?