By Louie Latour
Nearly every mortgage lender will trade points for better terms or a lower interest rate. Whether or not paying points is in your best interest is another story. Here are several tips to help you decide if paying points when mortgage refinancing is worthwhile for you.
The decision to pay points when mortgage refinancing primarily depends on how long you will be keeping your home. If you stay in your home for at least five years you could benefit from paying points for a lower mortgage rate. Here is an example to illustrate how points save you money.
Suppose you’re considering mortgage refinancing for $100,000 and the lender quotes you an interest rate of 8.0% with zero points because you’ve had credit problems in the past. By paying three points at closing (one point=1% of the loan amount), you could qualify for a 6.75% mortgage rate. Your monthly payment at 8.0% would be $733 per month, and at 6.75% you would pay $648 per month. This results in a savings of $85 per month; it will take you 35 months to recoup the $3,000 you would be required to pay at closing.
The previous example illustrates how paying points at closing can be beneficial for homeowners with poor credit. Whether or not paying points is right for you depends on your financial situation. Don’t rely on your loan representative to recommend if paying points makes sense as a greedy loan representative will direct you to the loan option that yields the largest commission. Never ask your mortgage representative, “Which loan is best?” Instead, ask to see the rate sheet that shows your options with and without points so the two of you can work through the numbers.
You can learn more about your mortgage refinancing options, including costly mistakes to avoid by registering for a free mortgagee tutorial.
| To get your FREE six-part Mortgage Refinancing Video Tutorial, visit RefiAdvisor.com using the link below. Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. For a free copy of "Mortgage Refinancing - What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com. Claim your free mortgage refinance information guide today at: http://www.refiadvisor.com Article Source: http://EzineArticles.com/?expert=Louie_Latour |
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