Shopping for a mortgage involves understanding mortgage points, which allow borrowers to pay a fee to lower their interest rate and monthly payments. Typically, one point costs about 1% of the mortgage and reduces the rate by 0.25%. The savings depend on how long you stay in the home. Points can also be used with adjustable-rate mortgages, but the discount applies only during the initial fixed-rate period. Consider your financial situation and the interest rate environment before deciding to purchase points.
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