good questions good answers

Good questions get good answers: Q: I heard rates are around 5.75% without paying points, and that sounds great, but what’s that mean to me? A: At 5.75% (5.85 APR) on a 30 year mortgage, check out this payment chart: 100,000 = $584 per month (principal and interest only). 200,000 = $1167/mth 300,000 = $1750/mth 400,000 = $2334/mth At this rate, you may want to move forward with that new home purchase or refinance! Q: And why is it that the “Feds” cut the rate again, but half the time, the mortgage interest rates don’t drop right away? A: The federal lending rate is not the same as the mortgage rates we see as borrowers. The “fed” lending rate is what the big banks get, and they wait to see what the stock and bond markets are doing before they make their adjustments. The good news is … it usually trickles down to us pretty quickly, like it did last time they made their cut. Q: Is Origination different than Discount when talking points, and are they both tax deductible? Also, when are points good, and when are they bad? A: An Origination “fee” functions the same way as a discount point, each representing a percentage of the loan amount (1 pt. = 1%). Both are tax deductible. Points are actually prepaid interest on a loan, and work in your favor if they buy down your rate to help you save money on the monthly payment. Each point can take up to 3 or 4 years to recover in savings, so figure out how long you think you’ll own the home, and then you’ll know if they are worth paying for at closing. Watch out, some banks charge origination as a fee, and you might get the same rate through Prosperity without that fee. By Sean D. Cohen Prosperity Home Mortgage Consultant In-House Lender at the Oceanfront Long and Foster Real Estate Office. Office phone: 757 428 4600 Cell phone: 757 404 3387