How Much Does Buying a Point Lower Interest on a mortgage loan?

Points are calculated as 1 point = 1%. So it would equal a 1% upfront interest charge. It takes 8 points to drop an interest rate 1%. The following is the table for figuring it all out.

1% = 8pts

3/4% = 6pts

1/2% = 4pts

1/4 = 2pts

Basically buying a point isn't going to change your interest rate, you would need to buy at least 2 to see a reduction.

How Much Does Buying a Point Lower Interest on a mortgage loan?

A point is pre-paid interest and yes, 1 point = 1% of the loan amount which is often referred to as a %26quot;discount point%26quot;.

However, the discount point and the rate reduction are not necessarily a 1 for 1 ratio. It depends on the particular program you have applied for and current market conditions.

The only way to truly know how much your 1% discount point will buy down the rate is to call your Loan Officer and have him/her price it out for you.