Is paying points on a mortgage loan good thing?Answer:
Well, it depends. Before you start shopping for a loan, it is wise that you know if you are paying points on a mortgage loan, or looking for rebate. People pay points on a mortgage loan to reduce the rate and their monthly payments. Or, they take a no-cost loan or rebates in exchange for higher rate but lower closing costs.
If you are short on cash and planning to stay for several years on the property, paying points on a mortgage loan is not very recommended. If you are planning on keeping the house, it is advisable you buy points on your mortgage.
Is paying 3 points on a mortgage loan right?
Well, paying 3 points on a mortgage loan could be a substantial amount but it may reduce your rate by 0.5% to 0.625% depending on the lender. People tend to buy points when they are serious about keeping the house for more than 7 years. If you are undecided about how long you want to keep the house and whether you are getting a deal paying points on the mortgage loan, run some calculations.
What about paying rebate points on a mortgage loan?
Rebate points are lender-paid mortgage points and borrowers accept higher rate in return. If you need cash to fund your closing costs, taking rebate is one way to go. How much higher is the rate with the rebate depends on the lender, but with 2 points rebate you may expect around 0.5% rate increase.
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