And just what ARE points?  

Sounds mysterious, doesn't it?   

Boiling this down to the simplest explanation, paying points (also called discount points) means you are paying a lump sum of interest up front at the beginning of your loan to get a lower interest rate for the full term of your loan.   That's all it is.  Money out of your pocket into your lender's pocket,

Should you pay points when buying a home at Fort Hood?    

It depends on how long you are keeping the home.   Here's an example:  

 If you pay $1,000 to get a lower interest rate, and the lower rate saves you $20 a month:   

$1,000 divided by $20 equals 50 months 

You must own the home for 50 months to recoup what you paid in points.  After the 50^th month, you will finally be saving $20 a month through the term of your loan. 

Since most homebuyers at Fort Hood are active duty military, paying points is usually not the best course of action.    There's no guarantee that you'll be here long enough to reap any benefit from buying down your interest rate.   

So keep your money in the bank and feel confident you made the right decision regarding paying points when you buy your home at Fort Hood.   You can use that money to make updates and improvements to your new home that will pay off well when it's time to sell.

If you do want to consider paying points, ask your lender to compute the savings and how long it will take for you to recover the cost of the lower interest rate.

To see more about how points affect mortgage payments, check out this Points Calculator.

Mary Ann Daniell is a Licensed Texas Realtor serving the Killeen Fort Hood real estate market.  Call or email anytime if you need help buying or selling a home, or if you just have questions about what to expect for housing when you arrive at Fort Hood.