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Can someone explain how to figure what buying points save me? I talked to a broker today and he couldn't give me a straight answer to save his life. All I want to know is: if I buy 2 points, what will my rate be?
I know about the usual caveats with points and all that so I'll go ahead and say that we're planning on staying in this residence for 10 years or so. Plans change, I know, but the stock market sucks right now and i trust myself more to do what I need to do to get a good ROI than the managers of that mutual fund!
your rate of 7% will give you a 665.30 payment
if you pay 1% in a discount point that will be 1,000 at closing
This may lower your payment by 0.375% making your new rate at 6.625%
640.31
665.30 @7%
640.31 @6.625% but you have to pay 1000
24.99 monthly difference
Since you're paying 24.99 LESS per month it MAY look like a good deal
BUT you will need to divide it by the money invested 1,000 to see how many years it will take to recoup the cost
This may lower your payment by 0.375% making your new rate at 6.625%
640.31
This is the part I'd like to understand more. How do I know what to expect? "May" is such a vague word and when we're talking about a minor change in interest rates leading to thousands of dollars, I'd like to have as much precision as possible.
you need to ask your lender how much will it lower.
If they're not willing to tell you then find someone who will
Quote:
Originally Posted by sbanawan
This is the part I'd like to understand more. How do I know what to expect? "May" is such a vague word and when we're talking about a minor change in interest rates leading to thousands of dollars, I'd like to have as much precision as possible.
you need to ask your lender how much will it lower.
If they're not willing to tell you then find someone who will
Gotcha. So there's no "magic" to it. The Shea mortgage guy made it sound like it depended on the position of the Earth relative to Alpha Centuri multiplied by the speed of Haley's Comet when it's making it's turn around Pluto to find out the rate after paying some points.
i may charge 1 discount point for 0.375...and others may only give 0.25 in a rate change.
this is why you should shop around
Quote:
Originally Posted by sbanawan
Gotcha. So there's no "magic" to it. The Shea mortgage guy made it sound like it depended on the position of the Earth relative to Alpha Centuri multiplied by the speed of Haley's Comet when it's making it's turn around Pluto to find out the rate after paying some points.
Is it a linear reduction in rates? If I pay 1 point, I get a .375 reduction, 2 points, .75, and on? Or is it a diminishing returns on the reduction?
edit: so what is your actual rate?
Like renriq02 said, it's not linear. Banks will at times offer good buydowns when they want to move a certain product. It greatly varies and you have to shop around.
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