Real
Estate Matters with Tim Bro
Two Kinds
of Lender Points (fees)
1. Discount
points are prepaid
interest on your mortgage loan—you’re basically paying finance charges in
advance. Discount Points are used to "buy" your interest rate lower.
This is known as a rate "buydown." A general rule of thumb is that
one full Discount Point will lower your fixed interest rate .250 percent or
your adjustable rate .375 percent.
Lenders
regard this type of points as covering their cost for offering a lower interest
rate over the length of the loan. The more points you pay, the lower the
interest rate on the loan, and the fewer you pay, the higher the interest rate.
Paying discount points is a good idea if you plan to live in the house for a
long time.
2. Origination
points are charged by
the lender to offset the costs of making the loan or to boost profits. Most
loan officers’ compensation is based on origination points, but they still may
be negotiable in whole or in part. Some lenders add origination points into
their quoted points while other lenders add an origination point in addition to
their quoted points. Origination points are gross profit for the lender. They
are not tax-deductible.
To
get started with your home sale or purchase, call Tim @ 858-354-2354, “The Right Choice in Real Estate”. BRE #01224576
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