Mortgage Points

[Arrian]

Worth it? Not Worth it?

That is the question.

I get the basic idea: pay up-front for a lower interest rate. On its face, it seems like break-even is ~5 years out. That does not consider tax implications or what I might be able to earn on the money if I didn't put it down in points... which is why I remain unsure.

So, (American) financial gurus of Apolyton, what is your opinion on points?

-Arrian

[MRT144]

i demand a hockey analogy to solve this!

[Dauphin]

Mortgage point? What's that?

Generic thought, paying more up front to save money in the future is really only for those without any cashflow concerns.

Break even after 5 years? Can't you renegotiate your mortgage by then?

[Arrian]

Of course, I am aware that asking this on 'poly may not be the best of ideas...

-Arrian

[Arrian]

Originally posted by Dauphin
Mortgage point? What's that?

Generic thought, paying more up front to save money in the future is really only for those without any cashflow concerns.

Break even after 5 years? Can't you renegotiate your mortgage by then?

Mortgage point = 1% of your loan amount. This gets you a break on the interest rate.

I could renegotiate the mortgage in 5 years... if that makes sense (rates drop). That's by no means a given.

-Arrian

[MRT144]

Originally posted by Arrian
Of course, I am aware that asking this on 'poly may not be the best of ideas...

-Arrian

You know algebra, you can figure it out.

[Flubber]

Assuming that your personal circustances don't dictate otherwise, isn't this just a math question?

[Dauphin]

Originally posted by Arrian


Mortgage point = 1% of your loan amount. This gets you a break on the interest rate.

I could renegotiate the mortgage in 5 years... if that makes sense (rates drop). That's by no means a given.

-Arrian

Are US mortgages fixed rate for the entire length of the mortgage then? Banks don't have the rate revert to an overinflated variable rate after a certain time such that you should renegotiate before that term is up?

[Arrian]

There are a variety of mortgage options. I'm going with a 30-year fixed rate. You can do adjustable rate mortgages, but you are then gambling that in X years, the rate will have dropped, which IMO is a bad idea.

-Arrian

[Arrian]

Originally posted by Flubber
Assuming that your personal circustances don't dictate otherwise, isn't this just a math question?

Yes, but forgive me if my head hurts a bit. Not because I can't do basic math, but because this is but one of the many things I'm trying to deal with right now.

I get the basics of it, but the question, I suppose, is whether it actually might make more sense to not pay any points and try to do better via investment. There are also tax implications, which are dependent on our specific tax picture, which none of you know...

Bah. Maybe I'll just pay 1 point, which is kinda like a "hedge my bets" option.

-Arrian

[Bugs ****ing Bunny]

If you're looking at 30-year rates, you don't want to speak to a mortgage expert. You want to speak to a prophet.

[korn469]

Arrian,

What kind of mortgage are you doing?

[Arrian]

30 year fixed rate... "conforming"

Anyway, going with 1 point for a 6% rate, with lower closing costs than the original quote (haggling while tiresome, does work). If rates drop dramatically down the road, we will refinance.

Thanks to those who responded.

-Arrian

[Japher]

rate probably won't drop too much in the future

with that said I wouldn't take the points, instead I'd try to get into a 15 year fix, if not leave the points and put the money down on the principle with the idea of refi'ing to a 15 in 5 years.

IMO, points are a rip off

[korn469]

Arrian,

6% should be par rate. I'd keep on haggling with him.

I have a few questions for you. Are you buying a house or doing a refinance? What's the approximate appraised value of the house? What's the approximate amount you're financing? Are you self employed or are you employed by a company that gives you a W-2? What state and county do you live in? If it's a refinance have you lived in the house previously? Feel free to answer me in a pm.