Mortgage Points Explained In A New Loan Love Guide

SAN DIEGO, Aug. 3, 2013 /PRNewswire-iReach/ -- is a borrower advice website that provides detailed insights into the mortgage industry in a fun and entertaining way. The team at is devoted to help empower both first time and experienced homeowners with valuable resources, first-class knowledge and connections to top-rated industry professionals and has the mission of helping consumers and borrowers to obtain the latest information on mortgage lending trends, the real estate market and the U.S. financial landscape in order to help them obtain a home loan that they will love. In one of their latest articles, "What are mortgage points?" seeks to help loan borrowers by having mortgage points explained.

This new article delves into explaining the core concept of mortgage points and what types of mortgage points there are. As the article points out: "Most times when buyers and mortgage pros talk about points, they're talking about a percentage of the mortgage that you pay upfront in order to reduce your monthly payments. Usually, a single point is equal to one percent of the mortgage total (so, for a $300,000 mortgage, one point would be $3,000, two points would be $6,000, etc.). Here's where it gets a little confusing: Just because you pay points upfront doesn't mean the total amount of your mortgage will be reduced – in this example, your mortgage will still be $300,000. What it does mean is that your interest rate is slightly reduced for each point you pay."

In most cases when paying points on a mortgage upfront, every payment to a single point will reduce your interest rate by one-quarter of a percentage point. While this is generally the rule of thumb, lenders may vary with their mortgage points and with the recent trend of low interest rates, points are more likely to be worth less among most lenders, up to about one-eighth of a percentage point. What this means is that when a loan borrowers is paying points, the borrower is essentially paying their mortgage rate in advance with a reduced monthly payment. Loan borrowers may to consider taking "negative-points" option when making payments. These negative points take effect when a home buyer chooses to pay slightly higher interest rate in favor of having credit towards their closing costs. Many home buyers will take this alternative when they find closing costs a little too costly to handle.

However, there may be drawbacks to these negative points. To simply put, the interest rate, no matter how small the increase is, may substantially increase the total amount of interest as time goes by. An example shown on the Loan Love article says: "Consider a $200,000 loan at 4.5%. Over a 30-year term, you'd end up paying $164,813.42 in interest. Now say you decide to take a credit toward your closing costs in exchange for an increase in the interest rate to 4.8%. At that rate, after 30 years you would have paid $177,759.06. That's a difference of $12,945.64. Depending upon the credit you're receiving and how difficult it would be for you to pay closing costs upfront, you may or may not consider that to be a good deal." For home buyers with a certain amount of credit, this can be devastating and may be discouraged from choosing to use negative-mortgage points.

All things said, paying upfront or with negative-mortgage points both have their pros and cons. This is highly dependent on a home buyer's financial and credit situation, and a number of steps should be taken before factoring in which option will save more money for a home owner in the long run and not weighed down by the costs.

For more information and to answer the question "Are mortgage loan points right for you?" please visit for the full article.

Media Contact: Kevin Blue,, 949-292-8401,

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