If after paying 20% down payment,I still have funds left -can I use it towards down payment or for buying points?

Asked by Seeker, 08043 Fri Nov 4, 2011

Which strategy will help me to get a good interest rate and lower monthly payments on a 30 yr fixed mortgage?

thanks in advance

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Marco Gomez &…, Agent, Jackson Heights, NY
Tue Nov 15, 2011
You can buy points, but that only makes sense if you plan on living in the home enough time to recover the closing costs + points, which varies from home to home depending on the purchase price.

Marco Gomez
NYS Associate Broker
Keller Williams Landmark II
0 votes
, ,
Fri Nov 11, 2011
Cash is king, keep a sizable liquid reserve in case of an emergency. If you don’t like that suggestion there is an easy way to find out if buying points makes sense. Upfront cost divide by the difference it makes in monthly payment equals the recapture period.

If you are going to live in the home long enough to get double the return it may be a good deal to buy down points. With rates as low as they are today I doubt it is a viable option.

Following my advice, if the points cost $2,000 you should look for $6,000 in monthly payment reduction over the holding period. Yeah, yeah, taxes, I know, any right off you write a check for is not tax shelter, it is an expense.
Hope this is helpful,
0 votes
Christopher…, Agent, Tarrytown, NY
Fri Nov 11, 2011
Hi, You can put down any amount you want to lower your loan amount. Typically you buy points before locking your rate. Ask your loan officer what they suggest for your financial snapshot.

Christopher Pagli
Licensed Associate Broker
Accredited Buyer Representative
GREEN Designated Agent
William Raveis Legends Realty Group
0 votes
Jeanne Feeni…, Agent, Basking Ridge, NJ
Fri Nov 11, 2011
I like Larry's answer - but to your question of whether you can put more money down, you can always add more cash, seller's generally don't mind seeing the cash portion increase. As far as the impact on rate, talk to your mortgage pro about that.

Jeanne Feenick
Unwavering Commitment to Service, Unsurpassed Results
0 votes
Bobby Jean H…, , Wilmington, NC
Fri Nov 4, 2011
Since interest rates are historically low right now and no one knows when they may start rising again....I would definitely take action on purchasing as soon as possible. Also...you can use the lenders money for purchasing the house at this low interest rates and hold on to your personal money to either purchase another property for investment, or other investment opportunities....which real estate by far is #1 on that list!
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Larry Sarlo, Agent, North Wildwood, NJ
Fri Nov 4, 2011
Buy google (goog) with the money if you really don't need it !
2nd best investment you'll ever make. Or wait to buy Facebook later 1Q next year. or even Qualcomm (qcom)
you're already buying the best... Property.

Property only goes up from here. Buy goog and you'll pay off your house and retire in 10 years.
Web Reference:  http://www.larrysarlo.com
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Joan Congilo…, Agent, Freehold, NJ
Fri Nov 4, 2011
Interest rates are so low right now that you really should not have to pay points to buy down your interest rate. Please remember that although you are putting 20% down which is great you will still need more money for closing costs. If you have already taken that into consideration and still have extra funds I'd suggest keeping it in a savings account for rainy day household emergencies.
Web Reference:  http://www.joancongilose.com
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Dan Tabit, Agent, Issaquah, WA
Fri Nov 4, 2011
First your lender may require you to have funds on hand as a reserve. Next, buying down the rate depends on the time you'll own the home and the pay back. If you can pay $X more now and recoup it in 1-2 years after which you are ahead, and you plan to be there 3 or more years, go for it. If the pay back is 5 or more years, it gets pretty iffy. Most people change homes or loans in less than 7 years.
Your lender can go over the various costs/benefits with you and help you decide if you don't need to keep the additional funds in reserve.
0 votes
BG, Home Buyer, Phoenix, AZ
Fri Nov 4, 2011
I haven't seen a house that wouldn't require a big chunk of $ to either fix/upgrade/furniture etc ... or save it for a rainy day.
0 votes
Lew Corcoran, Agent, Easton, MA
Fri Nov 4, 2011
After you make your downpayment, you should bear in mind that unless you opted for a no closing cost option mortgage or unless the sellers is contributing to your closing costs, that you will have closing costs and should budget accordingly.

Assuming you have sufficient funds to cover both a 20% down payment and the closing costs, the lender most likely will expect you to have sufficient reserves to cover about 2 months of mortgage payments (Principal, Interest, Taxes, and Insurance or PITI) after settlement.

If you have additional funds available, then you can consider making a larger down payment and/or making a contribution towards 1 or 2 points to lower the interest rate on your mortgage. The larger the down payment and/or the lower the interest rate on your mortgage, the lower your total monthly mortgage payment will be - and the easier it will be for you to qualify for a mortgage.

You should discuss these options with your mortgage lender or broker.
Web Reference:  http://Lew.BestChoice.net
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John Juarez, Agent, Fremont, CA
Fri Nov 4, 2011
Your mortgage professional is definitely the best person to answer this question for you.
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Larry Sarlo, Agent, North Wildwood, NJ
Fri Nov 4, 2011
Rates are really low now. I don;t know how much lower you would want them. From here they go up. when this Euro thing is settled we will see higher rates. Not much higher but these rates will go away. 5% is really a good rate. But 4 4.5% that is insane. Today rates went sharply lower. so if you can lock in it may not be a bad idea. Why not do a Bi monthly or a 15 year mortgage? Talk with you mortgage guy...

Your extra cash is extra cash. Why spend it...? SAVE SAVE SAVE is the "new" American way...!

Pay your debt down. that is what I always preach. If you can decrease your debt then do it. Always have cash reserves though.

Larry Sarlo
RE/MAX Preferred
609-868-1171 call / text / email 7 days

0 votes
Ines De La C…, Agent, Marlton, NJ
Fri Nov 4, 2011
Hello Seeker,
Thank you for your question.
Yes, if you are lucky enough to have more than 20% down to put down for your mortgage you can pay more down if you want. Your mortgage will be decreasing depeding according the amount you put down. Buy points to reduce your interest rate if you are planning to stay in the home for several years. Have the loan officer run you both scenarios to see what makes sense for you.
Let me know if you have any other questions.
Web Reference:  http://www.inesdelacruz.com
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Anna M Brocco, Agent, Williston Park, NY
Fri Nov 4, 2011
The best person to answer your question is your loan officer; also consider consulting with your financial planner and or tax professional, see what options are best for you...
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