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How much can you save by buying mortgage points?
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Homebuyers looking for some relief will have to wait a bit longer.
That seemed to be the message earlier in April as the latest inflation report from the Bureau of Labor Statistics showed inflation rising again in March for the second month. That report significantly dimmed hopes that the Federal Reserve would cut interest rates in response to cooling inflation. And while the Fed doesn’t directly set mortgage rates, an elevated Federal Funds rate will do little to help homebuyers.
With the average mortgage interest rate hovering near its highest point since 2000, then, some buyers may be considering alternative ways to reduce costs. One of the more effective ways involves purchasing mortgage points. Mortgage points are a fee that a buyer pays a lender to secure a lower rate. So, think 7.25% for a 30-year mortgage loan right now without points or 6.75% or lower with them tacked on. To better understand the value of mortgage points in today’s market, it helps to know how much you could save by pursuing this option.
Start exploring your current mortgage rate options online here today.
How much can you save by buying mortgage points?
The amount of money you can save by purchasing mortgage points will vary based on a few factors. Savings are dependent on the mortgage amount in question as well as the interest rate you’re “buying down” (for the below calculations we’ll use today’s 7.29% average for a 30-year loan). The amount and the cost of points (typically each point costs 1% of your total mortgage loan) will also factor in.
With those factors in mind, here’s how much you stand to save by buying mortgage points for a $431,000 home (the average price of a home now):
4 mortgage points (1 full point lower)
- Cost of points: $17,240
- Rate: 6.29%
- Monthly payment with the 4 points: $2,665.00
- Monthly payment without points: $2,952.00
- Monthly savings: $287.00
3 mortgage points (75 basis points lower)
- Cost of points: $12,930
- Rate: 6.54%
- Monthly payment with the 3 points: $2,736.00
- Monthly payment without points: $2,952.00
- Monthly savings: $216.00
2 mortgage points (50 basis points lower)
- Cost of points: $8,620
- Rate: 6.79%
- Monthly payment with the 3 points: $2,807.00
- Monthly payment without points: $2,952.00
- Monthly savings: $145.00
1 mortgage point (25 basis points lower)
- Cost of points: $4,310
- Rate: 7.04%
- Monthly payment with the 3 points: $2,879.00
- Monthly payment without points: $2,952.00
- Monthly savings: $73.00
Start saving by buying mortgage points with a top lender now.
Other considerations
As the above calculations illustrate, mortgage points could result in substantial monthly and annual savings for homeowners. It’s important to note that the above figures assume a buyer wouldn’t put a down payment on the home. If they do (most lenders want 20%), that total mortgage loan amount would drop and the the monthly costs would be lower.
Like mortgage refinancing, however, it’s also critical that borrowers weigh the costs of any mortgage points against the time it takes to break even. Points can generally be paid upfront at closing or rolled into the overall mortgage loan. Buyers will want to plan on staying in the home they’re purchasing long enough to recuperate those mortgage point costs. If they move before then, the monthly savings won’t make up for the costs they had to pay out of pocket to get that lower rate.
Finally, it’s crucial to understand the mortgage rate environment before taking this step. Mortgage rates change daily and are affected by a variety of factors. If you time your mortgage application well (an inherently riskier move), you could secure a lower mortgage rate simply by locking it in when rates fall versus buying those points in advance. It’s a calculated risk, but one that may be worth it for the right homebuyer.
The bottom line
In today’s mortgage rate climate, every extra dollar helps. And mortgage points can help keep more of those dollars in your pocket, albeit with an upfront cost. But if you’re looking for ways to save on monthly mortgage payments, this is a safe and viable way to do so, potentially allowing you to save hundreds of dollars monthly. Just make sure to carefully weigh the pros and cons of this strategy to make sure it’s the best one for your financial situation.
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California Gov. Gavin Newsom vetoed a bill Saturday that would have required new cars to beep at drivers if they exceed the speed limit in an effort to reduce traffic deaths.
California would have become the first to require such systems for all new cars, trucks and buses sold in the state starting in 2030. The bill would have mandated that vehicles beep at drivers when they exceed the speed limit by at least 10 mph.
The European Union has passed similar legislation to encourage drivers to slow down. California’s proposal would have provided exceptions for emergency vehicles, motorcycles and motorized scooters.
In explaining his veto, Newsom said federal law already dictates vehicle safety standards and adding California-specific requirements would create a patchwork of regulations.
The National Highway Traffic Safety “is also actively evaluating intelligent speed assistance systems, and imposing state-level mandates at this time risks disrupting these ongoing federal assessments,” the Democratic governor said.
Opponents, including automotive groups and the state Chamber of Commerce, said such regulations should be decided by the federal government, which earlier this year established new requirements for automatic emergency braking to curb traffic deaths. Republican lawmakers also said the proposal could make cars more expensive and distract drivers.
The legislation would have likely impacted all new car sales in the U.S., since the California market is so large that car manufacturers would likely just make all of their vehicles comply.
California often throws that weight around to influence national and even international policy. The state has set its own emission standards for cars for decades, rules that more than a dozen other states have also adopted. And when California announced it would eventually ban the sale of new gas-powered cars, major automakers soon followed with their own announcement to phase out fossil-fuel vehicles.
Democratic state Sen. Scott Wiener, who sponsored the bill, called the veto disappointing and a setback for street safety.
“California should have led on this crisis as Wisconsin did in passing the first seatbelt mandate in 1961,” Wiener said in a statement. “Instead, this veto resigns Californians to a completely unnecessary risk of fatality.”
The speeding alert technology, known as intelligent speed assistance, uses GPS to compare a vehicle’s pace with a dataset of posted limits. If the car is at least 10 mph over, the system emits a single, brief, visual and audio alert.
The proposal would have required the state to maintain a list of posted speed limits, and it’s likely that those would not include local roads or recent changes in speed limits, resulting in conflicts.
The technology has been used in the U.S. and Europe for years. Starting in July, the European Union will require all new cars to have the technology, although drivers would be able to turn it off. At least 18 manufacturers including Ford, BMW, Mercedes-Benz and Nissan, have already offered some form of speed limiters on some models sold in America, according to the National Transportation Safety Board.
The National Highway and Traffic Safety Administration estimates that 10% of all car crashes reported to police in 2021 were related to speeding. This was especially a problem in California, where 35% of traffic fatalities were speeding-related — the second highest in the country, according to a legislative analysis of the proposal.
Last year the NTSB recommended federal regulators require all new cars to alert drivers when they speed. Their recommendation came after a crash in January 2022, when a man with a history of speeding violations ran a red light at more than 100 mph and struck a minivan, killing himself and eight other people.
