Points are relatively common in mortgage lending. Sometimes referred to as “discount points” because paying points discounts the interest rate, points are nothing more than a form of prepaid interest given to the lender at the settlement table instead of paying additional interest each month as part of your mortgage payment. Whether or not to pay points is completely up to you because the lender really has no preference one way or the other. You either pay interest over time or pay a portion of it upfront. But when you’re refinancing, should paying points even be in the discussion?
Probably not and here’s why. When you’re considering a refinance, the math typically suggests it’s a good thing or maybe not so good. A refinance just like a purchase money loan has associated closing costs involved and these costs need to be considered before making the move. For example, let’s say you’re thinking of refinancing because rates have fallen. Closing costs add up to around $4,000 and lowering your rate would reduce your payment by $100. If you divide the savings into the costs that means you would need to keep the mortgage for at least 40 months.
So called “no closing cost” mortgages still have closing costs it’s only that the lender has adjusted the rate upwards enough to provide a lender credit to offset part or all of your fees. There is a cost involved it’s just in the form of a higher rate.
Now what about the points involved? Typically a loan officer will suggest not paying any points because the additional point won’t lower the payment enough to offset the points paid. On a $250,000 loan amount, one point is $2,500 and will lower a 30 year rate by about 0.25%, or $36. If you divide the savings into $2,500 the result is almost six years. That’s far too long for the point to be of any benefit. You’re probably better off taking that same amount an applying it toward your principal balance, but not paying points during a refinance.
LOOKING FOR WHERE TO GET A MORTGAGE LOAN? APPLY WITH US NOW!!!
Do you need a quick loan for your mortgage? Apply for a loan online with us. Zion Finance - Lend Up, is an Internet-based direct-to-consumer lender. We specialize in providing loans for customers with less-than-perfect credit.
We can help you with a genuine loan to start a business or even to expand your existing business. Our loan services include personal loans, auto loans, truck loan, equipment loans, debt consolidation loans, home loans, mortgage loans, agricultural loans, small business loan and commercial business loans. Amount ranges from $3000 to $20 million. Repayment period is between 6 months to 25 years. We offer secured and Unsecured loans. Even without a collateral, we can still provide you a good loan.
To apply contact our e-mail: zionloanfirm.ltd@aol.com
Comments
Post a Comment