byu1's predicament

[cougjunkie]

Originally Posted by il Padrino Ute

Points are a huge ripoff. They're just another way for the mortgage company to suck money out of your pocket and increase the commission of the guy doing the mortgage for you.

I must weigh in here and defend my profession for a second. Points are not a ripoff if you plan to keep the mortgage the full term, or a substantial amount of time. For example. Usually paying 1 point or percent will buy down your interest rate .5%. So for example:

200,000 loan amount, at an interest rate of 6.5%, closing costs at 3% so you pay 6000 in closing costs and your payment is 1264.16.

If you pay 1 point and buy down the rate to 6% it looks like this:

200,000 loan amount, interest rate of 6%, closing costs at 3% plus additional 2,000 for 1 point. Your payment is: 1167.15 a month.

So to make it simple you save 100 a month, in 20 months you recoup your original 2k, and over the next 28 years you will save yourself: $33,600.

[il Padrino Ute]

Originally Posted by cougjunkie

I must weigh in here and defend my profession for a second. Points are not a ripoff if you plan to keep the mortgage the full term, or a substantial amount of time. For example. Usually paying 1 point or percent will buy down your interest rate .5%. So for example:

200,000 loan amount, at an interest rate of 6.5%, closing costs at 3% so you pay 6000 in closing costs and your payment is 1264.16.

If you pay 1 point and buy down the rate to 6% it looks like this:

200,000 loan amount, interest rate of 6%, closing costs at 3% plus additional 2,000 for 1 point. Your payment is: 1167.15 a month.

So to make it simple you save 100 a month, in 20 months you recoup your original 2k, and over the next 28 years you will save yourself: $33,600.

Fair enough.

I should have stated that in my situation, points would have been a ripoff.