Buyers With High Downpayments Should Do This

By
Real Estate Appraiser with William Raveis Real Estate

Buyers, if you have more than 20% downpayment, you should consider buying down your interest rate.  Instead of putting the extra cash to pay down the mortgage amount put the extra cash into reducing the interest rate.   It's called a buy down. 

Comments (4)

Steve Loynd
Alpine Lakes Real Estate Inc., - Lincoln, NH
800-926-5653, White Mountains NH

Maria

Points to ponder the thought is if you plan to own a place less than 5-7 years buying down the rate is not worth while. If you intend to own it for ever and can shave a point off for a grand or two you will make it back in spades over a 30 year loan. Great reminder for people that have saved more than the required down payment. Steve

Jul 23, 2008 02:35 AM
Dave Woodson
Dave Woodson - Chesterton, IN
Not the Average Agent

Yeah, what steve said...doing the math to determine the best way to go is key.  My wife will create a spreahsheet every time

Dave

Jul 23, 2008 02:49 AM
Randall Schrader
Competitive Insurance of Dundee - Dundee, FL

The points are typically tax deductible, and you definitely want to stay below 80% to avoid MI.

Jul 23, 2008 02:58 AM
Randall Schrader
Competitive Insurance of Dundee - Dundee, FL

You also want to figure your breakeven point on interest savings vs. cost of the buy down.

Jul 27, 2008 12:51 AM