Do you plan on keeping your loan for a while? Then it may make sense to "buy" a lower interest rate by paying one or more "points."
A point -- which equals one percent (1%) of the total loan amount -- is an up-front fee that lowers your annual interest rate and total interest due over the life of your loan. So, a one point loan will have a lower interest rate than a no point loan. Basically, when you pay points you trade off paying money later in favor of paying money now. You can pay fractions of points, meaning there are a lot of points packages that can make a loan's terms more favorable if that's what's right for you. We do this everyday and it's our job to make sure you don't pay more than you have to. We will calculate a break-even point for you so you can decide if paying points makes sense. In most cases these days, it does not make sense for our clients to buy points because of the extended break-even period.
There are a variety of rate and point combinations available. When you look at different loan programs, don't look just at the rate -- compare the whole package. If you don't know what you look for and want some honest advice, we would be more than happy to go over your estimate, even if it's not with our company. If your deal is better than the one we're able to offer, we will tell you. If we can save you money, we'll show you how so you can make an informed decision.