Mortgage rates fluctuate state by state and day by day. With the home purchase normally being the largest purchase a person makes having the right mortgage is important.
I am in the process of purchasing a home as many of you know and am to the point of purchasing points or not. A point on your mortgage normally costs you 1% of your mortgage. For example if you were borrowing $100,000 a point would cost you $1000. Discount points are fees paid to a lender at the closing to lower your mortgage interest rate. While buying points is sometimes a good decision, often times purchasing points costs you more than you save.
Each point paid on a 30-year mortgage normally lowers the interest rate by 0.125 percent. That means a 6.5 percent rate would be lowered to 6.375 percent if you purchase one point on our mortgage.
So figure out how much the point costs you and then find your break even point. Figure out how much you are saving each month by paying for the point and divide the amount paid to find out how many months to break even by purchasing the point on your mortgage.
If it is longer than you plan on staying in the home, it would not be wise to buy points on your mortgage. If you plan on staying longer than the cost of the point then it is often times a good decision to purchase the point.
Also points are tax deductible in the year that you pay them. So this is often times nice as well when looking for tax deductions.
I am purchasing a point and negotiated for a little over a half a point free. This was tough to get, but was worth the persuading of my loan officer.
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While this topic can be very challenging for most people, my belief is that there has to be a middle or common ground that we all can find. I do value that you’ve added pertinent and intelligent commentary here though. Very much thanks to you!
Our mortgage payments happen to be behind, do you recommend anything?