Choosing to Pay VA Mortgage Points for a Better Rate
Abstract
What are VA loan points? Buying a VA loan point - also known as a discount point or just a "Point" - means you're paying cash up front to lower the interest rate on your new home loan. Are VA loan points worth it? This is the key question when you're thinking about buying VA loan points: Are the discount points worth the upfront money? To answer that question, you'd need to know the future. How to calculate your own VA loan point savings Examples like the ones above can help you understand how VA loan points create savings on a hypothetical loan. Rolling discount points into a refinancing loan Unlike with purchase loans, the VA lets refinancing homeowners roll up to 2 discount points into the new loan amount. The homeowner is adding the cost of discount points to the loan amount: *the mortgage rate is for a hypothetical buyer; yours will likely be different**payment does not include property taxes, home insurance, or other add-ons In the example above, the VA would not allow you to finance the cost of discount points because the break-even point extends beyond three years. VA loan points FAQs Can you buy down points on a VA loan? Yes, the VA lets you buy down your mortgage rate through VA loan points, also known as discount points. How much does a discount point lower your rate? Each discount point lowers your mortgage interest rate by 0.25%. At the same time, buying discount points raises your annual percentage rate because APR reflects the prepaid cost of discount points.
