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Mortgage Broker In Edmonton: What are Mortgage Points? Do I Want to Pay Them?
First of all, what exacty are points? Borrowers pay points to a bank when a loan is closed. A point represents 1% of the face value of the loan. A $100,000 requires a $1,000 payment for one point. Feel free to ask mortgage broker in edmonton.

The idea behind points is to lower the overall interest rate on the home loan. There are different ways of calculating the benefit of a point, depending on the lender, but an example would be to pay 1.5 points to reduce your loan from the posted rate of 6.25% to 5.875%, or to 5.375% if you paid 2 points.

The longer you will live in the home, the more sense it makes to pay points; you also have to decide whether you can afford to pay the points. Borrowing to pay points makes little sense, since the idea is to save interest, not pay it. For many first time home buyers, points are not a good investment, since they will want to move to a different home in the near future.

Points need to be viewed as an investment in the mortgage. Perhaps you decide to pay 1.5 points to get a reduction from 6% to 5.5%, that's the investment you are making. What you are really doing is paying some of your mortgage interest ahead of time. See more updates atcraigslist on your net.

There are many calculators on the internet that can help you calculate how much you can save in monthly home loan payments by paying upfront points, based on the length of the loan or you can take the easy way out and contact a mortgage professional to do it for you.

The $100,000 loan we were talking about would require $1,500 in points to lower the rate to 5%. Then it is a matter of finding the breakeven point, by examining the mortgage payment differences between these two rates. A $100,000, 5.5% fifteen year mortgage will cost $599.55 per month. A $100,000 6%, thirty year mortgage will cost $567.79 per month.

The lower rate mortgage is $31.76 a month lower, but you have to pay points to get this lower payment. $1,500 divided by $31.76 is 47.23 months, or almost four years. That makes the decision simple; if you do not expect to be in your home a minimum of 47.23 months, the points do not give you any advantage.

After that point, however, the upfront investment of $1,500 is covered, and you will now save a net of $31.76 each month. If, a very big if in today's mobile society, you owned your home for the full thirty years of the loan, and multiply the $31.76 per month savings for thirty years, you would save $9,933.58 over the entire term of the loan! Try to inquire mortgage broker in calgary for some details.