2007-09-27 01:16:04 · 9 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
discount points are considered pre-paid interest. it generally takes 3 to 7 years for you to see the advantage of buying down the rate with points to see the lower monthly payment repay your initial expense. the average life of a mortgage is 7 years before you either refinance for one reason or another, move to a new area and sell/buy a home, buy a larger home when your kids grow up or your family gets bigger, buy a smaller home when your kids move out, etc.
mortgage lenders make most of their money when they service the loan (collect your monthly payment). the back end monies may change hands). but they may also sell your mortgage to another lender/servicing company so they can get the money back that they lent to you and then lend it out to another home buyer and collect more closing costs and possibly points.
2007-09-27 01:26:48 · answer #1 · answered by John S 4 · 0⤊ 0⤋
They seldom loose money. The lender is not the one that actually Carries the paper. The lender sells a bunch of mortgages as a lot to an investor for a given amount. The lender now has his money and has nothing more to do with the mortgage. It is the investors that may loose money like they have been doing in the USA lately. Even large banks in Germany have bought a lot of that paper and now have to put up millions of dollars of their money to keep it all from falling completely apart.
If the lender was the actual lender it would be much more difficult to get a mortgage.
2007-09-27 02:12:46 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Discount points are not a loss to the lender, they're added interest income! You are giving the discount to the lender, not the other way around! You pay the points to them and they cut the rate slightly. In the end, it's a wash though normally it costs YOU more money. It certainly costs you more money right now as your closing costs will increase by whatever the points are.
2007-09-27 02:00:59 · answer #3 · answered by Bostonian In MO 7 · 0⤊ 0⤋
They don't lose money with discount points. It's simply a question of for the loss of interest income in the future, i'm willing to pay this much now.
Money now is always worth more than money in the future. Like was said before make sure you'll be on the mortgage long enough to save enough in interest to cover your discount points you pay.
2007-09-27 02:39:23 · answer #4 · answered by matzael 3 · 0⤊ 0⤋
Discount points are points the lender charges the borrower for a lower rate. No one is losing money. http://www.choicerealestate.net/
2007-09-27 02:55:47 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Because they are looking to gain business. They also realize that over time people will refinance and they will not hold that mortgage for 30 years. If they sell of the mortgage, they make money again.
2007-09-27 01:20:00 · answer #6 · answered by bpl 5 · 0⤊ 0⤋
Because they usually don't lose potential money. By convincing someone that normally wouldn't take a mortgage that they should, they'll get them later down the track when that person has to default on their mortgage and insurance has to pay it, or they have larger fees or take longer than ordinary to pay off the mortgage.
2007-09-27 01:19:59 · answer #7 · answered by Anonymous · 0⤊ 2⤋
They dont lose the money....a person starts recuperating the costs after 4-5yrs...and the average person refinances every 3-4 yrs..........so they're hoping that you refinance!
2007-09-27 03:03:31 · answer #8 · answered by Anonymous · 0⤊ 0⤋
The majority of homeowners may think they are in it for the long run, but aren't. I think the average homeowner moves once every seven years or so nowadays.
2007-09-27 01:57:11 · answer #9 · answered by Brian A 7 · 0⤊ 0⤋