Question on Points

Discount points, commonly referred to as just "points" are additional up-front closing costs you pay today to artificially lower the rate. One point would be 1% of the loan amount. The more points you pay, the lower the rate. Paying points is not good or bad. It comes down to simply math. What are the cost of the points, and how much does it lower the payment. Next, taking that math, what is the break even period? From there, does it make any sense. For example if you pay $5,000 in points, and it takes 5-years to earn that back with a lower payment, but you move if 4-years, you lost money. On the other hand if the breakeven is 5-years, and you think you will be there for well past that, you are ahead the longer you stay there. Last, factor in the time value of money. By this I mean, do you even have the extra money today to pay the points, and could you have maybe used the money for something better today. I personally lend for properties in MN, WI, IA, ND, SD. Find me at JoeMetzler.com - Cambria Mortgage, NMLS 274132