Each point costs a fee equal to 1 percent of the loan amount and typically reduces your mortgage rate by about one-eighth of a percentage point. So if you're borrowing $250,000 and the standard interest rate is 4.00 percent, you can buy a point for $2,500 and reduce your rate to 3.875 percent.
How much should you save every month? Many sources recommend saving 20 percent of your income every month. According to the popular 50/30/20 rule, you should reserve 50 percent of your budget for essentials like rent and food, 30 percent for discretionary spending, and at least 20 percent for savings. We agree with the recommendation to save 20 percent of your monthly income.
The larger the mortgage amount, the greater the potential savings a homeowner receives upon refinancing a mortgage. A difference of 2 percentage points between existing and offered rates on a 30-year mortgage yields a savings of approximately $125 a month for a $100,000 loan. Changes in home values influence when and if a homeowner should refinance a mortgage. When values increase, a homeowner&#039;s equity in a house increases.