Financing in Pacifica>Question Details

kspence, Home Buyer in San Bruno, CA

What are points? can a buyer right them off? or the seller?

Asked by kspence, San Bruno, CA Fri Feb 1, 2013

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Be very careful! Every situation is different. They are not always tax deductible, you should ask your CPA about what you can or cannot right off.

Some buyers pay points to buy down their rates. What you need to determine is if it's worth it or not.
Example, if your rate is 4% for a $500K loan w/ no points, and you pay 1 point= 1% is $5,000, how much lower will your rate be? 3.75 or 3.875???

That's the question to ask your mortage professional. The other question you need to ask yourself is how long you plan on keeping that property. Why pay an extra $5,000 upfront if the numbers don't work in your favor.

Best of luck.

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David Tapper
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0 votes Thank Flag Link Thu Feb 14, 2013
Points are what you pay to your lender for their services. The buyer taking out the loan can write off the points when he or she gets a loan.
0 votes Thank Flag Link Sat Feb 2, 2013
A point is a percent of the loan amount 1point equals 1percent of the loan. Your lender may charge points or half point and after that they can be paid to reduce the rate as Andre said. I am not an accountant so I will not answer the question on write offs. Buyer pays points unless you ask for a credit for closing costs in your purchase agreement.
0 votes Thank Flag Link Sat Feb 2, 2013
Points usually reduce your interest rate. The buyer buys down the rate with points. Usually a point will reduce your interest rate by about 1/8 percent. Not to be confused with upfront PMI fees on FHA loans.
Point for purchase money loans can be deducted on a b uyer's schedule A in the year incurred if (s)he itemizes. Points for refis have to be amortized over time.
0 votes Thank Flag Link Fri Feb 1, 2013
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