We almost always recommend “No Points” loans in the current market. One Point is 1% of the loan amount. We recommend “No Points” loans so often b/c borrowers get too little for paying the point, we think.
In the current market, b/c the yield curve is so flat, borrowers might only improve their rate by 1/8 percent by paying a point. For a $400,000 loan one point will cost $4,000 and the slight rate improvement will save the borrower about $30 per month.
It will take about 11 years for the savings to make up the cost of the point. That is not worth it. Even if the point lowers the rate by 1/4 percent, it would take almost 6 years to make up the cost.
Our rule of thumb is that the cost of points must be made up with savings in four years or less.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646