Buying down points is a strategy used in mortgage lending to reduce the interest rate on a home loan by paying an upfront fee. Each point typically costs 1% of the loan amount and lowers the interest rate by 0.25%. By reducing the interest rate, the monthly mortgage payment is also reduced, making it more affordable.
There are several benefits to buying down points. Firstly, it can save money on interest over the life of the loan. Secondly, it can make a home purchase more affordable by reducing the monthly mortgage payment. Thirdly, it can improve the loan-to-value ratio, which can make it easier to qualify for a mortgage.