is it a good idea to pay points on a mortgage?

Answer 1

Edward, I would only consider it if you plan to stay in the property for quite some time so you benefit from the extra cost of it. You can take the difference of not paying points vs paying points and the difference in payments per month. You can tell how many months or years it will take to regain that back before you start saving money on it.

If it cost you 1000.00 to buy the rate down and your payment is 100.00 less then it would take you just over 4 years to get that back. Just an example.

If you plan to sell the property in the next 5 years or so probably not a great idea. On the average, most folks will sell in 5 years but all different situations.

Answer 2

I believe it is almost always better to pay points upfront on a mortgage. You will get a lower rate by paying the origination/ broker fee. Basically, if you do not pay points upfront, the loan officer will increase your rate in order to get yield spread from the bank he places the loan with. By paying the origination fee you can get the lowest rate you actually qualify for instead of a rate normally .25- .5% higher.
Payments on a 30 year mortgage will go up about $15 per $100,000 for every .25% difference in rate. With a little calculation of how long you plan on keeping the home vs. the cost of the origination fee and the loan size- you can find a break even point for your origination fee. If you plan on being in the home longer than it takes to break even on the point(s)- pay it up front.
You will want to be checking with 2-4 loan officers to ensure you are getting a good deal as far as the rate goes. Assuming you are going with full income/ assett documentation- 6.00% is the par rate for most lenders right now. But the rates have been trending up the last few days so timing is everything...

Answer 3

It depends. Point = 1% of loan amount. By paying a 1 point, it should reduce your loan interest rate by 0.125%. It maybe different from lender to lender. What ever the case is, paying point help you if you are going to keep the house for at least 3 year, maybe 5 yr. after that you start saving money. But if you are going to sell the house before 3 to 5 years, then no it is not worth it paying a point. Ask the lender to give you two numbers (monthly payment). One with point and one without point. By looking at those two numbers and doing simple math, you can figure out when the points that you purchased will start paying off (like i said it should be between 3 to 5yr.)

Answer 4

If your middle credit score is high, or if you can go FAH or VA, than why would you want to do this - since the rates are still awsome, in the 6% for conforming, VA has no MI, where FHA and conforming does. Or you can add .25 - .50 to the rate and not have MI - A 100 percent 1 loan at 7 percent with awsome credit has no MI. There are many variables to consider, job time, income, credit being the big issue.

Yes you can buy your rate doen to 5.250 at a cost to you of 2.750
Only your can decide if this is the route to go. Good Luck to you.

Answer 5

Your loan officer should be able to clearly show you, on paper, whether it makes sense. Factor in how long you intend to be in the home, whether you have improvements planned over the next few years (refinance likely?), and how long it will take to break even on the points paid.

In my experience, it takes 5-7 years on average to break even on paying a discount point. Most mortgages last 5-7 years. Guess who wins in most cases? The banks.

Answer 6

That depends on how long you are going to be there. Do the math and you should have your answer. If you'd like to post those numbers, we can give you a better idea.

Joe...

Answer 7

it can be. all depends on your specific situation. try a break even calcluator