## Can You Buy Mortgage Points After Closing?
**Introduction**
Mortgage points, also known as discount points or origination fees, are a way to reduce your mortgage interest rate upfront in exchange for an additional upfront payment. Each point typically costs 1% of the total loan amount and can reduce your interest rate by 0.25%. By purchasing points at closing, you can lower your monthly mortgage payments and save money over the life of the loan.
However, what if you didn’t buy points at closing but later decide you want to reduce your interest rate? Can you buy mortgage points after closing?
**Yes, it is possible to buy mortgage points after closing. However, it’s not as common or as straightforward as buying points at closing. Here’s what you need to know:**
**Can You Refinance to Buy Mortgage Points?**
One option for buying mortgage points after closing is to refinance your mortgage. When you refinance, you obtain a new mortgage loan to pay off your existing one. You can use the new loan to finance the purchase of mortgage points.
**Benefits of Refinancing to Buy Points:**
* **Lower interest rate:** Refinancing to buy points can lower your interest rate, reducing your monthly payments and saving you money over the life of the loan.
* **Improved loan terms:** You may be able to improve other loan terms, such as the loan term or type of mortgage.
* **Cash-out option:** Depending on the value of your home, you may be able to cash out some of your equity when you refinance.
**Limitations of Refinancing to Buy Points:**
* **Closing costs:** Refinancing involves closing costs, which can offset the savings from buying points.
* **Credit check:** You’ll need to undergo a credit check, and your interest rate may be higher if your credit has changed since you first obtained your mortgage.
* **Loan qualifications:** You may not qualify for refinancing if your income or debt-to-income ratio has changed.
**Permanent Interest Rate Buydown**
Another option for buying mortgage points after closing is a permanent interest rate buydown. This involves getting a second mortgage to finance the purchase of points. The second mortgage typically has a lower interest rate than your first mortgage.
**Benefits of a Permanent Interest Rate Buydown:**
* **Lower interest rate:** A permanent buydown can lower your interest rate, reducing your monthly payments and saving you money over the life of the loan.
* **No credit check:** You don’t need to undergo a credit check to obtain a buydown loan.
**Limitations of a Permanent Interest Rate Buydown:**
* **Additional monthly payment:** You’ll have an additional monthly payment for the buydown loan.
* **Upfront costs:** There are upfront costs associated with obtaining a buydown loan, such as closing costs and appraisal fees.
* **May not be available for all borrowers:** Buydown loans may not be available for all borrowers or for all types of mortgages.
**Temporary Interest Rate Buydown**
A temporary interest rate buydown is similar to a permanent buydown, but it only lasts for a limited time, typically 2-5 years. The seller or a lender may offer a temporary buydown to entice buyers to purchase a home.
**Benefits of a Temporary Interest Rate Buydown:**
* **Lower monthly payments:** The buydown reduces your monthly mortgage payments for a specified period, providing temporary financial relief.
* **No additional monthly payment:** Unlike a permanent buydown, you don’t have to make an additional monthly payment.
**Limitations of a Temporary Interest Rate Buydown:**
* **Temporary:** The buydown only lasts for a limited time, after which your monthly payments will increase.
* **May not be available:** Temporary buydowns are not offered on all mortgages.
* **Can affect resale value:** A temporary buydown can make it more difficult to sell your home because the buyer will have to make higher monthly payments.
**Lender Requirements**
Not all lenders allow borrowers to buy mortgage points after closing. If you’re considering this option, check with your lender to determine their policies and requirements. Some lenders may have specific restrictions, such as:
* **Minimum loan amount:** Lenders may require a minimum loan amount to qualify for buying points after closing.
* **Loan-to-value ratio:** Lenders may limit the amount of points you can buy based on your loan-to-value ratio.
* **Appraisal:** You may need to obtain a new appraisal to determine the current value of your home.
**Costs of Buying Mortgage Points After Closing**
The costs of buying mortgage points after closing can vary depending on the method you choose and your lender’s fees. Here are some potential costs to consider:
* **Refinancing costs:** Closing costs for refinancing typically range from 2% to 5% of the loan amount.
* **Interest rate buydown costs:** Buydown loan costs can vary, but typically include closing costs and an origination fee.
* **Appraisal fee:** If an appraisal is required, you’ll need to pay an appraisal fee.
**Is It Worth Buying Mortgage Points After Closing?**
Whether it’s worth buying mortgage points after closing depends on your individual circumstances. Here are some factors to consider:
* **Your current interest rate:** The higher your current interest rate, the more you’re likely to save by buying points.
* **Your financial situation:** You should have enough cash on hand to cover the upfront costs of buying points.
* **Your plans for the home:** If you’re planning to stay in the home for many years, buying points can be a good way to save money over the long term.
* **Availability of options:** Check with your lender to see if they offer options for buying points after closing.
**Conclusion**
Buying mortgage points after closing is possible but not as common as buying points at closing. There are different options to consider, including refinancing, a permanent interest rate buydown, or a temporary interest rate buydown. The best option for you will depend on your individual circumstances and financial goals. If you’re considering buying points after closing, be sure to consult with your lender and carefully consider the costs and benefits involved.