offering me to buy points to lower my intererst rate?

Question

'im late 2 payments, I'm refinancing my house. They are offering me to buy points, because my finace rate is too high, in what way would that benefit me? how much is each point worth?

Answer 1

I believe each point is worth 1% of the total amount borrowed. I spoke with a mortgage broker not too long ago and they advised that if I was planning on staying in the home for a long time then it was advisable to pay points- because it indirectly lowers the total interest amount. However, short-term mortgages (or ones you are not planning on staying in for long) can benefit from not paying points up front.

Hope this helps

Answer 2

As your question indicates, you are two months behind in your existing mortgage. You are currently trying to refinance your home and the lender want to know if you are willing to buy down the rate. 1 point is equal to 1% of the mortgage amount. So if your loan amount was 150,000, each point you bought down to lower your rate would cost yu $1,500.00 each.

This is a good idea in some instances, a lot depends on how long you plan to reside in your home, or when you plan to refinace it again. (Sometimes difficult to determine-since some emeregency might arise) The other is how long will it take for you to break even or come out ahead on this buy-down.

The other thing about this buy-down is that it is normally deductale on your sch A on your federal income tax. (Check with you tax preparer or cpa for taxes information.) Of course whatever interest rate you pay the rate is tax deductable. Say your rate before the buy-down is 8.5% and you pay that rare. It is tax deductable. If you bought it down to 6.5% that rate would be deductable.

The reason for the buy-down is that the lower the rate the lower your monthly payments.

Now if your rate is high because you missed two payments, having a higher rate will not put you in a better postion once this loan close and you did buy down the rate. Why are you two months behind in your mortgage payment?

If you can pay the mortgage rate without the buy-down for one year and not be in a bind for the mortgage payment as well as your other debts, it might be good for you to accept the loan without the buy-down. Once you have paid your mortgage for a year then you can refinance for the current interest rate given to the best customers that want to refinance.

This will keep you from paying to buy down the rate, because this must be paid up front, but then your payments will be higher.

This is a decision that you have to make as to which is better for you and if you have the cash to pay the buy-down.

I hope this has been of some ue to you, Good luck.

"FIGHT ON"

Answer 3

Each point is indeed 1% of your loan amount. In order to determine whether or not this is a good idea for you subtract the principal and interest payment at the lower rate from the principal and interest payment at the higher rate and then divide the difference by 12. This will tell you how many months it will take to recover the points you paid and actually start saving on your monthly payments.

The rule of thumb, unless this is your last loan on your last house, is that you should recover the cost of the points in 3-5 years in order for it to be worthwhile.

Answer 4

well it means that your rate for right now is 9.9% interest. you have the choice of buying your points down like 2% for some amount. I have a better chioce for you.... I am a loan officer with one of the largest mortgage companies that has over 200 banks with killer programs and i think i might have one for your situation. If your interested in saving some money or even making some please feel free to email me back and we can go from there!

Answer 5

Good answers above, but also know that these points are considered deductible as interest by the IRS.

Answer 6

each point is 1% of your total loan amount do not let them do that. I work for Americam Mutual Financial Services and i can help you in fixing your credit and getting you a better rate.. if interested please reply at [e-mail]