Home Buying in Albany>Question Details

Elm, Home Buyer in Albany, NY

Any ideas on how to get out of paying points on mortgage rate?

Asked by Elm, Albany, NY Thu Dec 11, 2008

When you lock up a rate with a bank is it possible to not pay the points and go with the higher rate?

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Answers

5
Please let me know if your still looking for info on points. I would love to provide some helpful information.
0 votes Thank Flag Link Mon Dec 15, 2008
LIke everything else in real estate paying points up front is negotiable. You need to run the numbers to see if it makes sense for your specific situation and goals.
0 votes Thank Flag Link Thu Dec 11, 2008
Points translate into a "buy-down" of the interest rate. In exchange for getting more money up front, the lender takes a lower rate over the term of the loan. To the Bank, money now is worth more than money in the future.

Usually points are attached to "teaser rates". The potential buyer is drawn to the Lender by the lower rate and doesn't realize that he/she is paying for it. If you do not want to pay points your lender will most likely be willing to offer you a "zero point" rate, which of course will be higher. You should then do the arithmetic to figure out when your buy-down becomes cost effective. You will be saving $x per month through the lower rate. Add the total savings and divide by the dollar value of the points to determine how many years will elapse before the points are amortized. If you plan to stay in the home longer than that period, the buy down may be attractive.

However, in a low rate environment like we have presently a buy down is probably not justified. My guess is that you have a greater need for the money now rather than the savings over the long term.
Web Reference: http://lewis.fechter.com
0 votes Thank Flag Link Thu Dec 11, 2008
Elm,

Points are not mandatory, the purpose is to lower the interest rate. If you are comfortable with a higher rate, forego the points.
0 votes Thank Flag Link Thu Dec 11, 2008
You can always roll the points into the loan if the bank is OK with that. However is does raise the amount you finance and therefor your payment and more importantly, the amount you pay over the life of the loan. However, if financing the points is the difference between buying and renting, then do finance them as long as you are comfortable with the payment.

Hope that help,

Randall Sandin
843-209-9667
rsandin@carolinaone.com
0 votes Thank Flag Link Thu Dec 11, 2008
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