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Get The Appropriate Orlando Mortgage To Your Requirements
A "mortgage point" is equivalent to 1 percent of the amount of the loan, and is also at times paid to obtain a lower interest rate on a home loan. Orlando mortgage borrowers could also sometimes choose to take a slightly higher rate of interest and get a credit from the mortgage company to pay for some or all of the settlement costs on the loan. It can be a tough decision whether to pay points or "buy down" the rate on a home loan. Find the answers of the following 5 questions to help sort through some of the confusion:
1) How long do I decide to own this house?
The longer you retain the mortgage loan the longer you will have to take advantage of the lower rate. If you sell or remortgage a year or two down the road the lower rate will most likely not have generated significant cost savings.
2) Can I spend the money for the extra up front charges?
Be sure you can cover your down payment, settlement costs, and maintain the required reserves, or savings, needed to qualify for your loan before you think about paying points. When purchasing a whole new home it's also a smart idea to have a moving fund set aside for moving expenses and purchasing additional items you may not realize you need until you're in the home.
3) Who is paying the settlement costs?
If you are relocating for work and your boss is paying your settlement costs as part of a relocation package, or the seller of the home you are purchasing has agreed to cover the closing costs, purchasing down the mortgage rate could be a wonderful way to reap the benefits of the funds at your disposal. In both cases the amount is generally limited to a percentage of the loan amount, so you will want to be sure that the other required closing costs are paid for, and then any leftover amount might be able to go towards mortgage points. Verify to ensure that discount points are an allowable use of the relocation assistance or seller paid closing costs.
Whether or not to pay points usually comes down to running the numbers. Your Orlando mortgage professional can help you determine how many months it would require to break even when accounting for the extra up front charges. You also might want to ask a tax professional about the tax implications of paying points or additional interest as part of your monthly payment.
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