If the loan is held for a shorter time than a longer time period?
2007-09-17 04:48:04 · 3 answers · asked by Aja H 2 in Business & Finance ➔ Renting & Real Estate
Points are prepaid interest. When calculating the APR, all charges must be taken into account. As points increase, so will the effective APR.
2007-09-17 04:55:03 · answer #1 · answered by Bostonian In MO 7 · 0⤊ 0⤋
I don't know if these number are realistic, but say you paid one point on a $100K mortgage to lower the rate 1/2% and then sold the house after one year. So that one point would cost you $1000 but would only save you a hair less that $500 in interest. If you kept that house for several years though the interest savings would add up to exceed the $1000.
2007-09-17 05:41:53 · answer #2 · answered by Brian A 7 · 0⤊ 0⤋
Your assumptions are wrong I think.
The interest rate is higher on a shorter loan simply because it is a shorter term and the bank wants to make money off of you.
Points actually REDUCE your rate - it's like buying down your interest. 1 point = something like .25% less interest over the life of the loan.
2007-09-17 05:58:58 · answer #3 · answered by Roland'sMommy 6 · 0⤊ 0⤋