Points or No Points

Real Estate Agent with RE/MAX Agents Realty

Question: Which offers you the best deal, a low interest rate mortgage with "points" or a higher interest rate loan with no "points"?

Answer: It depends. Consider a 30-year, fixed-rate mortgage for $100,000 at 8 3/4% interest and no points. Monthly principal and interest payments would be $787. To qualify for an 8 1/4% loan, you have to pay three points, or $3,000. Payments on this loan would be $751, a savings of $36 per month. How can you determine which loan is best?

First, calculate how long you will have to live in the home in order to recoup the $3,000 that you paid in points. Divide $3,000 by your monthly "savings" of $36, then divide that answer (approximately 83) by 12 months per year for the number of years it will take to recoup the points (approximately 7).

If you are fairly certain you will live in your new home for seven years or more, then the loan with points is the better value. Other factors may influence your decision, however, such as how much cash you have for closing and your monthly budget. Such calculations will give you the data you need to make a decision.

Posted by

Dallas Chambers

RE/MAX Agents Realty

Office:  770-922-7777 X316

Cell:     770-595-1541

Web: www.dallasc.remax-georgia.com

E-Mail:  dallasc@remax.net

Each Office Independently Owned and Operated.  All information deemed reliable but not guaranteed.


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Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Dallas:  The best answer for this question is, as you said... it all depends.  The only thing I would add... is that although it takes about seven years for the monthly payment savings to make up the extra money paid in points... oftentimes things change.  One may buy a home thinking they will be there forever, or for seven, or ten, or whatever years.  But, again, things change, and you may end up needing to move in three years.  Some things are just impossible to predict.

May 03, 2010 10:23 PM #1
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