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With Mortgage Rates In Washington Declining, Does It Make Sense To Pay Points?

With Mortgage Rates in Washington Declining, Does It Make Sense to Pay Points?

Summary: Mortgage rates in Washington State and nationwide are declining, and have been for the past year and a half. Will home buyers be using discount points to secure a lower rate on their mortgage loans? This article will explain the latest trends and developments on this front.

Mortgage rates are on a downward trend and are expected to remain low over the foreseeable future. Does it make sense for home buyers to use discount points to bring their mortgage rate down even further?

MBA: Average Mortgage Rates Dip to Lowest-Ever Point

According to Freddie Mac, mortgage rates plummeted to 3.23%, their all-time low over the week of April 30, 2020

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) is currently 3.26%.

At the start of this year, the average rate for a 30-year fixed home loan was 3.72% according to Freddie Mac’s industry survey. And it’s been on a decline since late 2018.

The point is that mortgage rates are lower now than at the start of this year. But will borrowers in Washington to use discount points when they take out a mortgage?

View WA State Mortgage Rates Aug, 07, Fri, 2020

Using Discount Points for a Lower Rate

A “discount point” is an amount of money paid by a borrower at closing in exchange for a lower interest rate. One point equals one percent of the loan amount, and it’s typically paid at closing.

Borrowers who can afford to pay a little extra up front often use this strategy as a way of “buying down” the mortgage rate. When used as a long-term strategy, paying points has the potential to save the borrower a considerable amount of money.

Mortgage rates in Washington are decreasing, so it remains to be seen the number of home buyers and homeowners who choose to pay points at closing. The more points paid by the borrower, the lower the rate. So it’s a tradeoff. There’s more money paid up front, but the lower rate could produce savings over time.

As mentioned above, this strategy tends to work best for a long-term stay. Depending on the amount of points paid at closing, it could take a few years for the savings (derived from the lower mortgage) to surpass that extra amount paid to close.

Home Prices Still Rising in Washington

Meanwhile, home prices across Washington State continue to climb. The median home value for the state as a whole had risen to $428,900 as of May 2020, when this article was published. It was closer to $767,900 in Seattle, and even higher in Bellevue and Sammamish.

This too could have an impact on the number of borrowers in Washington who choose to pay points at closing. Higher home prices could make the discount point strategy more attractive to some home buyers.

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Need a mortgage loan in Washington? At Sammamish Mortgage, we can show you if and how you might benefit from paying points, based on your specific financing needs. We have been offering a variety of mortgage programs to borrowers in Washington, Oregon, Colorado, and Idaho since 1992, and we’d love to help you. Please contact our knowledgeable staff for help.

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