Should You Pay Discount Points When You Get Your Mortgage

Dated: 04/17/2018

Views: 23


Should You Pay Discount Points When You Get Your Mortgage?

Should You Pay Discount Points When You Get Your MortgageOne of the challenges you will face when deciding how much money to put down on your new home is whether to put down a larger down payment or to take a bit of money from your down payment and use it to buy “discount points” to lower your interest rate.

There are pros and cons to doing both and each borrowers situation will be different so it’s important to understand which option is best for your individual situation. Some factors you should consider include:

  • Cost of borrowing – generally speaking, to lower your interest rate will mean you pay a premium. Most lenders will charge as much as one percent (one point) on the face amount of your loan to decrease your rate. Before you agree to pay points, you need to calculate the amount of money you are going to save monthly and then determine how many months it will take to recover your investment. Remember, closing points are tax deductible so it may be important to talk to your tax planner for guidance

  • Larger down payment means more equity – keep in mind, the larger your down payment, the less money you have to borrow and the more equity you have in your new home. This is important for borrowers in a number of ways including lower monthly payments, better loan terms and potentially not having to purchase mortgage insurance depending on how much equity you will have at the time of closing

  • Qualifying for a loan – borrowers who are facing challenges qualifying for a loan should weigh which option (points or larger down payment) is likely to help them qualify. In some instances, using a combination of down payment and lower rates will make the difference. Your mortgage professional can help you determine which is most beneficial to you

There is no answer that is right for every borrower. All of the factors that impact your mortgage loan and your overall financial situation must be considered when you are preparing for your mortgage loan.

Talking with your mortgage professional and where appropriate your tax professional will help you make the decision that is right for your specific situation.

For More Info Visit: http://www.bondstreetloans.com

Latest Blog Posts

Smart Technology Or Home Automation Whats The Difference

Smart Technology or Home Automation: What’s the Difference? Is it worth it to add smart appliances or automated features if you’re selling a home? Just how much connectivity do buyers want? And

Read More

What You Need To Know About Your Home Appraisal And Your Mortgage

What You Need To Know About Your Home Appraisal And Your Mortgage When buying a home, there are certain steps a buyer should go through before the home sale is official. First the buyer makes the

Read More

Green Technology To Reduce Your Homes Carbon Footprint

Green Technology To Reduce Your Home’s Carbon Footprint When you are a homeowner looking to reduce your carbon footprint, there are a number of steps you can take to make your home earth.

Read More

Thinking About Buying A FixerUpper Know These Top Resources To Make The Most Profit

Thinking About Buying A Fixer-Upper? Know These Top Resources To Make The Most Profit If your financial situation is limited, yet you’re handy with a hammer and nails, then purchasing a fixer

Read More