What Are Discount Points On A Mortgage Loan?
By Ann WhiteNitty-gritty information that you should know and understand before you commit yourself to signing up for and buying Discount Points on a Mortgage.
What Are Discount Points on a Mortgage?
Discounts points are a form of pre-paid interest with one point equaling one percent of the loan amount. They are entirely optional unless they are required for the buyer to qualify for the loan payment, either because his income is less than requisite or because the expenses of the purchase are greater than expected.
When does the buyer benefit from buying discount points?
If the buyer intends to stay in the home for an extended period of time, Discount Points on a Mortgage will benefit the buyer. The longer the buyer keeps the property financed under the original loan with purchased points, the more the buyer will benefit.
Can the seller benefit from the buyer’s Discount Points on a Mortgage?
If the buyer, for whatever reason, sells the house sooner than he expected to sell it and before the discount points have paid for themselves, the seller will benefit from the buyer’s purchase of discount points on the loan.
What happens to the Discount Points on a Mortgage if the seller refinances?
If the seller refinances before the discounts points have paid for themselves, then the buyer’s purchase of the discounts points on the loan end up costing him more than the higher rate on the mortgage would have cost him.
Caution
It is important for the buyer act with care because he or she makes a calculated gamble when paying for points as there will a specific point in time at which the money spent to buy the points and pay down the interest rate will equal the money saved on the lower interest rates and reduced loan
Related posts:
- Should I Pay Points to Lower My Mortgage Interest Rate?
- Should I Pay Discount Points On My Mortgage?
- How Do I Buy Interest Rates Down For A Mortgage?
- What Are Points On A Mortgage Rate And How Do They Affect My Loan?
- Are Mortgage Points A Good Investment?
