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Old 07-26-2008, 01:00 AM
 
Location: Georgia, on the Florida line, right above Tallahassee
10,473 posts, read 13,411,168 times
Reputation: 6344

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Just curious. I saw this thread....
Is leasing a home a good alternative if it isn't selling? And other seller questions/concerns.

and I live in the Seattle suburbs (Actually will be joining my family in about 3 weeks...goodbye Iraq...but I digress...).

The topic is buying down points vs. lowering the price. I think this artificially keeps selling prices high. I also think people tend to move pretty often. Which makes getting a cheaper price better than getting a cheaper interest rate. I tend to think that if 200 bucks more on the payment is going to kill you, you probably shouldn't be buying the house anyway.

But I'm throwing it out there....would you rather have a cheaper interest rate or a lower price?
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Old 07-26-2008, 08:40 AM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,097,275 times
Reputation: 952
Of course it varies and depends on certain situations. You have to do the math and figure when the break even point (the point in time where the interest savings equals and then surpasses the amount of the discount point) is. If you plan on staying in the home past this break even point than it may very well be better to buy down the rate.
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Old 07-26-2008, 11:10 AM
GLS
 
1,985 posts, read 4,739,430 times
Reputation: 2406
Quote:
Originally Posted by 70Ford View Post
Just curious. I saw this thread....
Is leasing a home a good alternative if it isn't selling? And other seller questions/concerns.

and I live in the Seattle suburbs (Actually will be joining my family in about 3 weeks...goodbye Iraq...but I digress...).

The topic is buying down points vs. lowering the price. I think this artificially keeps selling prices high. I also think people tend to move pretty often. Which makes getting a cheaper price better than getting a cheaper interest rate. I tend to think that if 200 bucks more on the payment is going to kill you, you probably shouldn't be buying the house anyway.

But I'm throwing it out there....would you rather have a cheaper interest rate or a lower price?
I would rather have a lower price because I usually pay it off early (2 to 5 years).
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Old 07-26-2008, 11:22 AM
 
Location: Cary, NC
1,036 posts, read 3,627,489 times
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This is the same argument a home buyer has of paying points out of their own pocket or taking a higher rate. The answer: it depends on your situation.

If you plan to pay the loan off fast or to move in 3-5 years, takign the lower price or saving money up front is a better choice. If you plan to live in the house for 10-15 years and will only make the regualr 15 or 30 year payment, then the lower rate will be a better bargain over time.

This is where its pays to have a good mortgage broker/banker versus a "sales person" that just takes orders (online or by phone) and spits out a response from the script their company provides. Depending on yoru tax rate, length of time in the home, mortgage program, savings rate, disposable income, inflation and other factors the best choice will vary. Its all about the math and someone's personal risk/reward tolerance.
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Old 07-26-2008, 11:47 AM
 
Location: CNJ/NYC
1,240 posts, read 3,641,764 times
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Depends on the situation- if there is a good interest buydown opportunity then to match the monthly savings by lowering the price enough would require dropping the price so significantly that most sellers would balk at it (read: it ain't gonna happen).
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Old 07-26-2008, 12:04 PM
 
Location: CNJ/NYC
1,240 posts, read 3,641,764 times
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Quote:
Originally Posted by 70Ford View Post
The topic is buying down points vs. lowering the price. I think this artificially keeps selling prices high. I also think people tend to move pretty often. Which makes getting a cheaper price better than getting a cheaper interest rate. I tend to think that if 200 bucks more on the payment is going to kill you, you probably shouldn't be buying the house anyway.

But I'm throwing it out there....would you rather have a cheaper interest rate or a lower price?
Let's take an example.

Purchase price: $625,000, the buyer has $125,000 (20%) to put down. The loan amount then $500,000 and the desired monthly payment is under $3,000.

Starting interest rate: 7%. Amortizing 30 year fixed rate mortgage. Payment: $3327 monthly.

Buydown to 6% (let's say it costs 1.5 points, which is not unreasonable, or $7,500). Monthly payment is now $2,998. 23 Month break even period not accounting for possible tax deduction.

Now, in order for the seller to lower the price enough to give the buyer that lower payment at the starting interest rate (since the buyer has a thing against points) means that the purchase price has to be reduced by $154,592 so that with that same $125,000 down payment the buyer can get a loan amount of $345,408. Do you see the seller dropping the price $154,592 or the buyer coming up with an extra $154,592 for down payment instead of $7,500 for 1.5 points? I don't.
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Old 12-12-2013, 05:42 PM
 
Location: In America's Heartland
929 posts, read 1,823,735 times
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Lower price always trumps interest rate. My first mortgage was 14.5%.
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Old 12-12-2013, 09:12 PM
 
16,489 posts, read 17,513,441 times
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I'll take a lower price because I can put a good down and pay extra towards principal
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Old 12-13-2013, 09:00 AM
 
34 posts, read 59,285 times
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Lower price. Interest rates could always go down again (and usually do). Then just refinance when it makes sense.

Also, like others mentioned, I pay extra principle always.
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Old 12-13-2013, 11:11 AM
 
3,317 posts, read 7,253,255 times
Reputation: 4095
Quote:
Originally Posted by 70Ford View Post
Just curious. I saw this thread....
Is leasing a home a good alternative if it isn't selling? And other seller questions/concerns.

and I live in the Seattle suburbs (Actually will be joining my family in about 3 weeks...goodbye Iraq...but I digress...).

The topic is buying down points vs. lowering the price. I think this artificially keeps selling prices high. I also think people tend to move pretty often. Which makes getting a cheaper price better than getting a cheaper interest rate. I tend to think that if 200 bucks more on the payment is going to kill you, you probably shouldn't be buying the house anyway.

But I'm throwing it out there....would you rather have a cheaper interest rate or a lower price?
Points are not cost effective. Are you eligible for a VA loan? I'm a big fan of throwing the bulk of your debt into the house for the mortgage interest write off, keeping cash handy, paying off other accounts, and then attacking the payback structure aggressively.
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