With Mortgage Rates in Washington Still High, Is Now A Good Time to Pay Points?

Mortgage rates in Washington State and nationwide are still quite high, and have been for the past couple of years. 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 may have continued to increase this past year, and they are expected to remain high over the foreseeable future. Does it make sense for home buyers to use discount points to bring their mortgage rate down.

Average Mortgage Rates Are Very High

According to Freddie Mac, mortgage rates for 30-year fixed-rate mortgages currently sit at 7.76%, as of the week of November 2, 2023.

That’s 0.81% higher than where rates were at the same time last year, when the rate over the same week was 6.95%. But it’s still relatively high, nonetheless.

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

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 increasing, 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.

But given the current state of mortgage rates, paying down the rate with points might make sense right now. That’s because this strategy tends to work best when rates are very high, which they are right now. As such, it might be a good strategy for buyers to buy down their rate with points.

Home Prices Still High in Washington

Meanwhile, home prices across Washington State continue to remain high, though they’ve actually dipped over the past 12 months. The median home value for the state as a whole had risen to $571,248 as of November 2023. It was closer to $826,592 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.

Get a Mortgage Estimate

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.