Points lose favor

By
Real Estate Broker/Owner BRE# 01353757
http://actvra.in/x7y

Consumers and specially people that are trying to buy, rent, or refinance their homes; save their homes from foreclosure; or sell their properties might hear some different stories and feel differently about the news and how they might be affected by it.  Here is an interesting article worth a few minutes of your time:

 

 

 

The New York Times

Points lose favor
With interest rates at or near record lows, many borrowers are seeing little reason to pay points when buying or refinancing a home.  Some are even opting for what’s known as “negative points,” agreeing to a slightly higher rate to help pay closing costs.

Making sense of the story

 

  • Paying points enables a borrower to “buy down” the interest rate on a mortgage in exchange for an upfront fee.  The trend away from points partly reflects borrower sentiment that rates are already low enough, according to industry experts.

 

  • A point equals 1 percent of the loan amount, so paying one point on a $250,000 refinancing costs an extra $2,500 at closing, in addition to other mortgage fees, taxes, and escrow amounts.  Paying a point usually reduces the interest rate by 0.25 points over its term, so for instance, instead of 4 percent, the rate is 3.75 percent.

 

  • The average number of points paid in 2011, according to a Freddie Mac survey, was 0.7 percentage points, less than half the levels people paid in the 1990s.  The average has been 0.7 percent for three years, after it hit a low of 0.4 percent in 2007; in 1995 it averaged 1.8 percent, according to Freddie Mac data.

 

  • The primary advantages of paying points are a lower rate and monthly payment.  To decide if paying points is worthwhile, borrowers should consider two key decisions: How long they plan to live in the home, and how much they can afford in close costs.

 

  • Many mortgage professionals suggest following this rule: If the borrower plans to live in the home for at least five years, paying points will help the homeowner to reap savings. 

 

  • Some borrowers are even going for negative points, which is also called a lender rebate or points in reverse.  In exchange for accepting a higher interest rate, the lender agrees to give the borrower a credit, which is usually used for closing costs.

 

 

 

Read the full story.

 

                       

Posted by

Call Frank,  Buy or Sell with CONFIDENCE & KNOWLEDGE

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Broker, Agent, or/and MLS provider does not guarantee the accuracy of: 1- the reports, charts, articles, and also the information from links to other websites. 2- Square footage, lot size or other information regarding the conditions or features of properties provided by the seller or obtained from Public Records or other sources as presented in this website. Many articles may be time and date sensitive so please always look at the date posted. Consult your tax advisor, financial planner, attorney, or/and appropriate professionals concerning your personal specifics. Interested parties are advised to independently verify the accuracy.                                                            

                                                          Frank Moham  DRE LIC. #01353757

 

 

 

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Rainmaker
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Phil Leng
Retired - Kirkland, WA
Phil Leng - Retired

Hi Frank,

Cash is always at a premium when buying a home.

If there is a way to lower the closing costs, it makes sense for a lot of people to do just that

Phil

Mar 08, 2012 05:51 AM #1
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Rainmaker
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Frank Farahbakhsh Moham

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