refi - points - buy rate down?
- Thread starter stockrex
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Do you have any plan on paying it off early? At this interest and loan amount, I don't think so. Remember, if you sell your house before the term end or pay it off early, your purchases of the point is lost.
Originally Posted By: stockrex
does it make sense to buy the rate down during a refi?
for example 3% at par rate, for $200k loan, you can buy the rate down a .25% for $2k.
Should I go ahead and buy the rate down?
No...not unless you are in a very top tax bracket (over 40%)
does it make sense to buy the rate down during a refi?
for example 3% at par rate, for $200k loan, you can buy the rate down a .25% for $2k.
Should I go ahead and buy the rate down?
No...not unless you are in a very top tax bracket (over 40%)
It totally depends on how soon you plan on selling. If you're selling in 6 months obviously not. If you're staying for 30 years obviously yes.
In our state you can have the sellers pay closing costs which can include those points, so in my case my sellers paid 2% of the cost of the loan to get my rate down .625%.... and I even got to count that as interest paid on my taxes.
In our state you can have the sellers pay closing costs which can include those points, so in my case my sellers paid 2% of the cost of the loan to get my rate down .625%.... and I even got to count that as interest paid on my taxes.
There are calculators out there that tell you if its worth purchasing points.
Using a calculator is nice, but because the future date of sale is so inexact just simple interest can give you an idea. .25% on 180,000 is 450 a year, so payoff on this "bet" is somewhere around 5 years.
Either way you get to deduct this interest expense (weather you pay the fee now or interest in the future) so I'm not sure why your tax bracket would be that important to this decision.
Either way you get to deduct this interest expense (weather you pay the fee now or interest in the future) so I'm not sure why your tax bracket would be that important to this decision.
I ran it through a calculator real quick assuming a 30 year mortgage - if you plan on living there for more than 6 years 3 months then you are money ahead to buy the points.
Normally not a good idea to buy down the rate bu tdo need to look at the break even point in years and how long you think you will be in the house. A Refi, points for IRS are spread over the life of the loan, cannot be deducted in a lump sum in the year the loan is originated, so little if any tax benefit on the buy down points in the year it is done.
Also, all fees with a mortgage company are negotiable, do not assume that the fees they quote you for anything are cast in stone. Shop around for the title company to do the closing as well, their fees, other then recording costs, are very ,much negotiable. Sometimes attorneys are less expensive and will lower their fee to do the closing if you ask
Also, all fees with a mortgage company are negotiable, do not assume that the fees they quote you for anything are cast in stone. Shop around for the title company to do the closing as well, their fees, other then recording costs, are very ,much negotiable. Sometimes attorneys are less expensive and will lower their fee to do the closing if you ask
Originally Posted By: Vikas
If you do that, you are then locked in i.e. if the rates drop further you can NOT take advantage of new lower rate. Very rarely it makes sense to pay extra, especially in a market where rates have done nothing but go down over years.
It is a gamble. You are paying interest up front as point for the lower interest later, but if interest drop, you lost the advantage you paid for.
At the current interest rate, if you believe that it will not go any lower, and if you believe you will stay in this house for a very long time to justify the lower payment, and you have the income stability to pay for it for the long term (no layoff, no bankruptcy, no relocating for a new job), then it is worth it.
IMO it is just too much restriction consider that you can get very good rate fixed with no points, and not having to worry about whether you wasted your money buying points.
If you do that, you are then locked in i.e. if the rates drop further you can NOT take advantage of new lower rate. Very rarely it makes sense to pay extra, especially in a market where rates have done nothing but go down over years.
It is a gamble. You are paying interest up front as point for the lower interest later, but if interest drop, you lost the advantage you paid for.
At the current interest rate, if you believe that it will not go any lower, and if you believe you will stay in this house for a very long time to justify the lower payment, and you have the income stability to pay for it for the long term (no layoff, no bankruptcy, no relocating for a new job), then it is worth it.
IMO it is just too much restriction consider that you can get very good rate fixed with no points, and not having to worry about whether you wasted your money buying points.
The thing is if you are so sure that the rates will not go lower i.e. you have the best rate for next 10 years, I think you can make use of that knowledge to make *lot of money* for yourself by engaging some kind of financial derivative based upon your "future prediction"!
With NP/NC refinance craze of recent years, we ended up doing back to back refinance in less than 6 months and that is bordering on insanity! Obviously, my broker was still making money on this deal even though I did pay a dime to refinance.
After I did my very first NP/NC refinance, I knew then and there that there is no way I will every do another cost based refinance.
With NP/NC refinance craze of recent years, we ended up doing back to back refinance in less than 6 months and that is bordering on insanity! Obviously, my broker was still making money on this deal even though I did pay a dime to refinance.
After I did my very first NP/NC refinance, I knew then and there that there is no way I will every do another cost based refinance.
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