Is 6.25% fixed for 30 years (Principle Interest) on a 500k loan better or 5.875% fixed for 30 years

Asked by Raj, 95035 Wed Jul 9, 2008

(Principal interest) by paying upfront in discount points (1.278) for a house worth around $650 k. We plan to be around in the house for in around 7-10 years.

Any help is appreciated !!

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Arn Cenedella’s answer
Arn Cenedella, Agent, Greenville, SC
Wed Jul 16, 2008

Nelva's analysis is generally correct.
With a 7 to 10 year hold, paying the points and getting the lower rate and payment make sense.

Howver if rates drop in the first few years and you can refinance at a rate lower than those currently available, it might turn out to have been better to pay NO points and pay the higher interest rate.

Of course the difference of $120.90 per month in interest is tax deductible and so the actual after tax cost is more like 75% of that difference or more like $90 per month and that will effect the analysis.

Either way you are getting a good rate!

When I got into the real estate business 30 years, I paid 11.75% for my first house loan.
0 votes
Nelva Samiee, , California
Thu Jul 10, 2008
Hello Raj,

We have to analyze the cost of the loan and how long it would take you to the recoup the upfront cost.

The monthly savings for the lower interest rate is about $120 a month. Your cost upfront is $6390. It will take you 53 months to recoup this cost and thereafter you will reap the benefits of the savings. If you are planning to stay 7 -10 years then the lower rate might be benefical for you.

Also, the discount fee is a tax write off. On another note, if you pay the higher rate/ paymet then you have a higher amount to write off.

I hope this helps and if you have any further questions, please don't hestiate to contact me at

Good luck!

Nelva Samiee
Real Estate Loa Consultant
510.494.7840 ext.37
0 votes
Ailynne PeBe…, , San Leandro, CA
Wed Jul 9, 2008

This is a website for mortgage calculator:

The mortgage might be able to help to calculate how much your saving having a lower interest and paying the points versus 6.25% interest...
But the best person to give you advice are the real estate loan consultant.
You might want to contact the loan officer that I work with her name is
Nelva Samiee
Diversified Capital Funding
510-494-7840 Office
510-409-3015 Cell
510-494-7850 Fax
Give her a call she'll definitely give you a break down at no obligation to you.
Good Luck
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