If you are looking for a way to reduce your monthly mortgage payments, buying points could lower the interest amount.
Called discount points by mortgage brokers and lenders, this tactic is like an upfront payment for a lower interest rate, and one point is 1% of the loan amount. So if you had a $100,000 mortgage, one point would cost $1,000 while two points would cost $2,000.
“Paying for points lowers your interest rate because the lender receives the income in a lump sum at closing rather than collecting the interest as you make payments on your loan,” says Les Kramsky, executive vice president and general counsel to Silk Abstract Company, a title insurance agency and a real estate attorney in New Jersey