need morgage rates and points explained.....

how does it work. I know there are morgage rates, some without points, some with...

What exactly are points?

Here goes.

You will get quoted a mortgage rate of say 6%
You can then buy a point (cost may vary but say for $2500) and that will lower the rate your were quoted by either an 1/8 or 1/4 depending on what your mortgage company is offering.

The ones you are seeing advertised as 6% with 1 point may mean you have to pay a point to get that 6% rate

You need to decide if it makes sense to buy a point by determining how long you plan to stay in the house and how long it will take to break even.

Hope this helps

that does help...

if you plan on a 30 year mortgage, and staying in it for the 30 years do points help alot?

It depends on what you want your monthly payment to be....more points=lower payment because of lower rate.

FM me if you have any specific questions...I'm a loan officer.

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Posted by JENHOS

Here goes.

You will get quoted a mortgage rate of say 6%
You can then buy a point (cost may vary but say for $2500) and that will lower the rate your were quoted by either an 1/8 or 1/4 depending on what your mortgage company is offering.

The ones you are seeing advertised as 6% with 1 point may mean you have to pay a point to get that 6% rate

You need to decide if it makes sense to buy a point by determining how long you plan to stay in the house and how long it will take to break even.

Hope this helps

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one point represents 1% of your loan - so 1 point on a $300,000 loan will equal $3,000.

points are used to reduce mortgage rates.

this is definitely beneficial when planning on staying in a home for the term of the mortgage.

lets say you pay 1 point on a $300K mortgage, or in other words, $3,000. by doing so, your rate is reduced .5%, hypothetically. well that reduced rate, for example from 6% to now 5.5% will save you $100 a month, for example.

so you divide the the amount paid in points, $3,000 by the monthly savings, $100, you have for the reduced rates and you come up with 30 months, or 2.5 years.

so, it will take 2.5 years to make up this amount you paid at closing, the 1 point.

for people who plan on flipping properties or only plan on staying short term period (less than 7 years seems to be the general rule), its not worth paying points because you won't be in the house long enough to get all of it back (all of it back = reduced monthly payments)

points paid at closing are fully deductible in the year of closing too so keep that in mind for your tax return that you will file in april.

if you close in 2003, when you file the return in april, you get to deduct real estate taxes and mortgage interest - remember to look at your closing statement to determine how much real estate taxes you paid to the seller as well as how much interest you paid at closing (points + separately stated amount).