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Most people have no clue what home loan points are. In fact, even current homeowners find themselves stumped by this term. However, as you will discover in this article, home loan points can actually be highly beneficial to you, allowing you to pay less money each month on your mortgage.

So, what are home loan points - and how can they benefit you, the potential home owner?

Home Loan Points 101

The basics are not hard to understand if you are a fast learner. Home loan points are something that you buy so that you will get a lower interest rate on your mortgage.

Home loan points are basically 1% of your loan - so, if you’re taking out a loan of 100,000, one point would be about $1,000. Many times, you can buy these home loan points, and lower your interest rate.

But… are home loan points really worth it? Do they make that much of a difference? Why are they there at all?!

This is something important to understand, which we have addressed for you.

Are home loan points really worth the time?

In other words, you might want to know if you can afford spending more money for the points and if you do, will you expect to get something out of it in the end and without a lot of hassle.

Well, it depends on your personal situation, including the type of loan, and the loan company you’re looking into. The biggest question you need to ask yourself is this - do I have the extra money to spend on these points, and how much do I save?

If you are going to be saving as least $40 a month then you should take home loan points into consideration. The savings will outweigh the disadvantages and the payments that you may have upfront.

Then, you might ask why home loan points exist in the first place.

Not only are home loan points here to help you pay for a better long term loan, but they’re there to let you have the choice. You can pay more now, and get a lower interest rate, but if you don’t have the money, that’s okay, too - you still get a decent loan.

Additionally, while you enjoy many benefits so does the loan company. The reason is that they get the money you pay upfront for the home loan points, which is why they are in business in the first place - to make money. Typically, these companies make the points an optional thing.

The Bottom Line Is

These home loan points can help you but your don’t have to have them. It’s up to you and your money situation. Be wise and careful.