More buyers are purchasing mortgage points as a way to ease monthly costs
SEATTLE, April 26, 2023 /PRNewswire/ -- Interest rates remain high and home buyers are looking for ways to save money, including buying mortgage points. A recent analysis of data from the Home Mortgage Disclosure Act (HMDA) by Zillow Home Loans finds nearly
Mortgage points, also known as discount points, are an option for buyers to pay an upfront fee to buy down the interest rate on a loan. The term "points" is a common way of referring to a percentage of your loan amount. When buyers choose to purchase mortgage discount points, they are essentially pre-paying interest up front in exchange for a lower rate and monthly payment.
While buying points is more common now, it's most often used by borrowers who make less than their area's median income (between
Regardless of income level, borrowers were more likely to purchase points for homes in the top and middle price tiers, than for homes in the bottom price tier. This could be because the impact of lowering interest rates is greater on more expensive mortgages.
Reducing interest rates doesn't come for free, and buyers need to determine if paying up front to reduce the fee in favor of lower monthly payments is worth it. Generally, mortgage applicants need to pay
"Buying points can be a great option to improve monthly affordability — there are many different mortgage products, including buying points and the 2/1 buydown buyers can explore," said Erika Kerry, loan officer at Zillow Home Loans. "These options are good examples of why it is so important to work with a knowledgeable loan officer. The loan officer should be a partner in the buying process, helping explain options so buyers can make an educated decision."
Affordability remains a top concern for home shoppers. A recent Zillow analysis found that nationally, home values are about
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SOURCE Zillow Home Loans