Should You Pay Points on Your Mortgage?
A mortgage lender has several rates available and all of them have a price. If you don't want to pay points, the quote is usually the rate that cost nothing, or at least closest to nothing. Lower rates are available and can save you money with lower monthly payments and less interest over the life of the loan. One of the most important factors in determining if paying points benefits you is the answer to the question.... how long do you plan to live in your home.
For example, if you pay $2,000 in points to get a lower rate and consequently lower your monthly payment by $40, it probably makes sense to do so as long as you plan on staying in your home at least 50 months. If you think you may be selling in 2 - 3 years, you are wasting money paying for the lower rate.
Why do I bring this up? It's simple. Most people shopping for a mortgage are looking for the lowest rate. Some lenders make it a practice to quote a rate that may cost 2% of the loan amount. So when compared to the rate that costs no points, that lender seems to have the best offer. Once you send in your documents you may discover that the rate quoted costs you several thousand dollars. Something they didn't tell you clearly at the beginning of the process.
At First Federal Bank we have very competitive rates and yes, you can buy a lower rate if it meets your needs. If you work with me, I will give you those options up front. No surprises. I'll even help you with the math so you know whether it makes sense or not. There is never any cost or obligation for your mortgage analysis.
If you are buying a home and funds available for down payment and closing costs are tight, we can also offer a rate that actually pays you lender credits to help cover the closing costs.
So don't be fooled by the lender with the lowest rate. Do your research. Request a "Loan Estimate". It will show you the cost of the rate. Even better... contact me. You'll have a complete understanding of how rates work and based on your needs, I'll provide the information you need to make the decision that is in your best interest.
Please contact me for your free mortgage consultation or even if you just have a few questions. I am more than happy to help!