Zillow: More Buyers Purchasing Mortgage Points to Ease Monthly Costs

An analysis of Home Mortgage Disclosure Act data by Zillow Home Loans, Seattle, found nearly 45% of conventional primary home borrowers opted to purchase mortgage points in 2022 as a way to reduce their monthly payment.

Zillow said while buying points is more common now, it’s most often used by borrowers who make less than their area’s median income (between 30% and 50% of their area’s median income) and are most concerned about monthly payments. Those who make less than 30% of an area’s median income purchased the most points overall for homes in the bottom price tier.

The historically low interest rates of 2019–2021 saw far fewer buyers opting for points — 29.6% in 2021, 28.4% in 2020 and 27.3% in 2019.  And borrowers who opted for a cash-out refinance loan (on a conventional loan for a primary home) bought even more points in 2022 — 57.8% of these borrowers purchased points (compared with 48.4% in 2021, 44.2% in 2020 and 41.3 in 2019).

Regardless of income level, borrowers were more likely to purchase points for homes in the top and middle price tiers, than for homes in the bottom price tier. Erika Kerry, a loan officer with Zillow Home Loans, said this could be because the impact of lowering interest rates is greater on more expensive mortgages.

“Buying points can be a great option to improve monthly affordability — there are many different mortgage products, including buying points and the 2/1 buydown buyers can explore,” Kerry said. “These options are good examples of why it is so important to work with a knowledgeable loan officer. The loan officer should be a partner in the buying process, helping explain options so buyers can make an educated decision.”

Affordability remains a top concern for home shoppers. A recent Zillow analysis found that nationally, home values are about 25% above where they would need to be for affordability to return to historical norms.