Why might a buyer choose to pay points on their mortgage?

When a buyer opts to pay points on their mortgage, they are essentially paying upfront fees to reduce the interest rate on the loan. This practice is often referred to as “buying down the rate.” Each point typically costs 1% of the total loan amount and commonly lowers the interest rate by a certain percentage, making the monthly payments more manageable. Over the life of the loan, this can lead to significant savings, particularly if the buyer intends to stay in the home for an extended period.

The other options present misunderstandings about the purpose of points. Increasing the monthly payment is not a desired outcome when paying points; the intent is to lower costs over time. Expediting the closing process is not related to paying points, as points are concerned with interest rates rather than processing speed. Lastly, paying points does not eliminate appraisal fees, which are separate costs involved in obtaining a mortgage. Thus, choosing to pay points aligns with the goal of reducing the long-term financial burden of the mortgage.