Up-front Points to Lower the Rate

9
117
views

When loans are quoted by lenders, most buyers pay attention to the interest rate but not so much to the points that may be charged along with the rate.19269905-250.jpg

A point is one-percent of the mortgage amount and considered pre-paid interest that affects the yield on the loan. Buyers or sellers can pay points but there can be limits based on underwriting guidelines for different types of loans.

A lower note-rate would obviously make the payments less. However, with a little analysis, you can determine how much points paid up-front can save a borrower or whether you’ll recapture the additional costs in the anticipated time in the home.

In the example below, two choices are compared; a 4.25% loan with no points vs. a 4.00% loan with one point. If the buyer stays in the home at least 69 months, he will recover the $2,700 cost for the point on the lower interest rate.

If the purchaser stays ten years, he’ll save two thousand dollars over the cost of the point. A less obvious advantage will be realized because the unpaid balance on the lower interest rate loan will results in an additional $1,780 savings.

buy-down example.jpg

This is an example of a permanent buy-down but temporary buy-downs are also available. A trusted mortgage advisor can help you determine alternatives.

9 COMMENTS

  1. cheap oakley sunglasses online

    This is my earliest time i afflict here. I base so tons absorbing baggage inside your blog particularly its discussion. From the tons of comments on your articles, I judge Im not the just one having all of the gratification here! keep up the nice work.

  2. canada goose store in canada

    Fantastic job here. I truly enjoyed what you had to say. Keep going because you absolutely bring a new voice to this subject. Not many people would say what youve said and still make it interesting. Well, at least Im interested. Cant wait to see more o…

  3. jimmy choo store locator

    Starting a content kind of like this one forced me to do some research and I found your post to be quite helpful. My post is centered around the idea of knowledge, fun and sharing. I wish you respectable luck with your web page in the future and you ca…

  4. birkenstock shoes sale

    Thank you a lot for providing individuals with such a marvellous opportunity to read in detail from this web site. Its usually very excellent plus jam-packed with a lot of fun for me and my office friends to search your website more than 3 times in a w…

  5. buy ecco online

    Perhaps you have considered adding some yahoo clips to your site to keep the members more entertained? I mean I just read thru the entire site of yours and it was fine but since Im more of a visual learner, I found that to become more helpful. Well you…

  6. balmain waxed jeans

    What I wouldnt give to have a debate with you about this. You just say so many things that come from nowhere that Im pretty sure Id have a fair shot. Your blog is great visually, I mean people wont be bored. But others who can see past the videos and t…