From a conversation with a buyer yesterday......


To me here's the main comparison of Paying down Points compared to a Down Payment of an equal amount.


To pay down points you pre-pay for your interest rate to be % points lower throughout your loan term.

To make a down payment you pay down the amount your total loan would be for.


Let's do some quick calculations of a comparison of the two:

$200,000 Price for a home

you have $40,000.


If you pay a $40,000 down payment your monthly payment at 6% interest would be $959.28 total interest paid over 30 years would be $185,341.10.

If you pay $40,000 to points up front at now 4% interest monthly payment would be $954.83 total interest paid over 30 years would be $143,739.01.


So that's a monthly difference of $4.45, ok not that big of difference.  But look at the total interest paid, that's a $41,602.09.  That's a nice brand new SUV to me.

Money Stacks

I may be missing something here....if I am please let me know what I'm overlooking, but that's pretty significant.


So the question I pose is why don't more people pay down on their interest rates instead of puting down large down payments???  In my opinion, all we've ever heard of is down payment, down payment, down payment, from the time we were little through today.  People don't know the difference.  You should have the information available to you to make a great decision.


-Phil Graves- logo Utah Buyer Agent