## Rocket Mortgage Points System
Rocket Mortgage, a popular mortgage lender, offers a points system that allows borrowers to reduce their interest rate in exchange for paying an upfront fee. Points are a type of prepaid interest that is typically expressed as a percentage of the loan amount. For example, one point on a $200,000 loan would cost $2,000.
### How Points Work
When you pay points, you are essentially buying down your interest rate. For every point you pay, your interest rate will be reduced by a certain amount. The exact amount of the reduction will vary depending on the lender, the loan amount, and the current market conditions.
For example, if you are getting a $200,000 loan and the current interest rate is 4%, you could pay one point to reduce your interest rate to 3.75%. This would save you $1,200 in interest over the life of the loan.
### Is Paying Points Worth It?
Whether or not paying points is worth it depends on your individual circumstances. If you plan to keep your loan for a long time, then paying points can make sense. However, if you plan to sell your home or refinance your loan in the near future, then paying points may not be the best option for you.
Here are some factors to consider when deciding whether or not to pay points:
* **The length of time you plan to keep the loan.** If you plan to keep the loan for a long time, then paying points can save you a significant amount of money in interest. However, if you plan to sell your home or refinance your loan in the near future, then paying points may not be worth it.
* **The current interest rate environment.** If interest rates are low, then paying points may not be worth it. However, if interest rates are high, then paying points can save you a lot of money.
* **Your financial situation.** If you have a lot of cash on hand, then paying points may be a good option for you. However, if you are short on cash, then paying points may not be the best option for you.
### How to Calculate the Cost of Points
The cost of points is calculated as a percentage of the loan amount. The most common point amounts are 1%, 2%, and 3%. For example, if you are getting a $200,000 loan and you pay 1 point, the cost would be $2,000.
### How to Pay for Points
You can pay for points with cash, a check, or a credit card. If you pay for points with a credit card, you may be charged a balance transfer fee.
### Pros and Cons of Paying Points
**Pros:**
* Can save you money on interest over the life of the loan
* Can lower your monthly payments
* Can make it easier to qualify for a loan
**Cons:**
* Can be expensive upfront
* May not be worth it if you plan to sell your home or refinance your loan soon
* Can reduce your equity in the home
### Other Ways to Lower Your Interest Rate
Paying points is not the only way to lower your interest rate. Here are some other things you can do:
* Shop around for the best interest rate.
* Get a good credit score.
* Make a larger down payment.
* Choose a shorter loan term.
* Pay extra on your mortgage each month.
### Conclusion
Paying points can be a good way to lower your interest rate and save money on your mortgage. However, it is important to consider your individual circumstances before deciding whether or not to pay points.