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Old 08-03-2008, 06:08 PM
 
53 posts, read 418,535 times
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Default Buying down points on a mortgage

Just wanted some feedback from anyone who has bought down points to lower their mortgage. How did this work? $1000 per point for every $100,000 that is mortgaged?
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Old 08-04-2008, 05:03 AM
 
Location: Jupiter
1,040 posts, read 2,155,912 times
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Talking Cheaper Rate

Quote:
Originally Posted by lawoman4368 View Post
Just wanted some feedback from anyone who has bought down points to lower their mortgage. How did this work? $1000 per point for every $100,000 that is mortgaged?
When you pay points to lower your mortgage...the bank/lender is getting money up front to lower your interest rate...hopefully for the full length of your mortgage......the advantage to you...is that if you stay there forever...you are the winner...but if you are buying a starter home and plan to sell and move in 5 to 7 years...maybe not...same concept if mortgage rates drop and you decide to re-finance...

There is a break even point somewhere in the mortgage...where from that point foward it will have paid for you to buy the mortgage down...your bank/lender knows this and all you should have to do is ask for it...but remember...your bank/lender would not be doing this iif it was a lose/lose situation for them...
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Old 08-05-2008, 02:13 PM
 
2,931 posts, read 5,460,086 times
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Quote:
Originally Posted by rusty78 View Post
There is a break even point somewhere in the mortgage...where from that point foward it will have paid for you to buy the mortgage down...your bank/lender knows this and all you should have to do is ask for it...but remember...your bank/lender would not be doing this iif it was a lose/lose situation for them...
For the bank, it's actually a break even situation. I used to do secondary marketing for a mortgage company and prepare what is called the "Daily Rate Sheets" that show the loan officers what they need to charge. Banks want to make x% on each loan that they originate. This is done two ways 1) by charging up front points (front end fees) and 2) by selling the loan into the secondary market for more then face value (back end fees). The higher the rate, the more they get on the back end. The lower the rate, the less they get.

So, the banks know what they want to make then subtract the amount that they will earn off any given interest rate to come up with the number of up front points they charge. You can "buy down" the rate by paying more points upfront. It also works the other way around. If you are concerned about cash for closing costs, some will let you "buy up" the rate and have some money credited back to you at closing.
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Old 08-07-2008, 03:35 PM
 
Location: New York
1,081 posts, read 2,018,236 times
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Quote:
Originally Posted by rusty78 View Post
When you pay points to lower your mortgage...the bank/lender is getting money up front to lower your interest rate...
Agree

If you plan to stay in your home for a long time, it is in your best interest to buy down your mortgage rate. Bank's differ, but it averages 1% of the loan amount = 0.5% rate buy down.

If your working with a broker, buying down the rate will cut into their commission...............
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Old 08-08-2008, 05:31 AM
 
Location: Bridgeville,Pa
4,177 posts, read 6,957,303 times
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I have never paid points. I just like taking the chance and also have a fixed rate .

d
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Old 03-30-2009, 01:07 PM
 
167 posts, read 336,117 times
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Is it common practice to buy say 2 points on a $400,000 home for $8,000? I mean rates are low right now, if I got say a 5% rate I would essentially have a 3% mortgage with (assuming) $48,000 down (10% + $8k)? I just wanted to add - this is hypothetical so maybe 20% down...

This would lower the monthly fee quite a bit as well....

just curious

Last edited by ianwaters; 03-30-2009 at 01:09 PM.. Reason: adding something
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Old 03-30-2009, 01:10 PM
 
153 posts, read 344,686 times
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Just want to mention that my wife and I decided to instead of put down 20%, put down 15% and buy a point. Even though our monthly payments will suffer for a little while, we wound up saving like 17,000 over the lifetime of the mortgage.

If you can afford it, i personally say go for it.
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Old 03-30-2009, 01:17 PM
 
167 posts, read 336,117 times
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Quote:
Originally Posted by mr.mrs.b.i View Post
Just want to mention that my wife and I decided to instead of put down 20%, put down 15% and buy a point. Even though our monthly payments will suffer for a little while, we wound up saving like 17,000 over the lifetime of the mortgage.

If you can afford it, i personally say go for it.
Is there any reason to not buy 2 points if I can afford it? Does this look bad to the bank, broker, lender, etc? I know the brokers don't like it since it cuts into their $$$ but hey, sorry but that's life, right?
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Old 03-30-2009, 01:21 PM
 
1,283 posts, read 2,390,536 times
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doesn't work like that....
if you pay 2 points on a 5% (with no points)mortgage, it will bring it down to I'm guessing 4.75%

Its not 1 for 1. otherwise sign me up for buying down 5 points on a 5% mortgage.
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Old 03-30-2009, 01:45 PM
 
153 posts, read 344,686 times
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Quote:
Originally Posted by Chrisk327 View Post
doesn't work like that....
if you pay 2 points on a 5% (with no points)mortgage, it will bring it down to I'm guessing 4.75%

Its not 1 for 1. otherwise sign me up for buying down 5 points on a 5% mortgage.
i think 1 point brings it to about 4.75 if my math is correct, it's not 1 point per percent.
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