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Grab The Appropriate Orlando Mortgage Loan To Meet Your Needs
A "mortgage point" is equal to 1 percent of the loan amount, and is sometimes paid to acquire a lower rate of interest on a home finance loan. Orlando mortgage borrowers can also sometimes prefer to take a slightly higher rate and receive a credit from the mortgage company to cover some or all of the closing costs on the loan. It could be a tough decision whether to pay points or "buy down" the interest rate on a house loan. Ask yourself the following 5 questions to help sort through some of the confusion:
1) Just how long do I plan to own this home?
The longer you keep the mortgage the longer you will need to benefit from the lower interest rate. If you sell or refinance a year or two down the road the lower interest rate will most likely not have generated significant cost savings.
2) Can I afford the additional up front costs?
Make sure you could cover your advance payment, closing costs, and maintain the required reserves, or cost savings, needed to qualify for your loan before you consider paying points. When buying a new home it's also a good idea to have a moving fund reserved for moving expenditures and getting additional items you might not realize you need until you're in the house.
3) Who is paying the closing costs?
If you are shifting for work and your employer is paying your closing costs as part of a moving package, or the seller of the house you are buying has offered to cover the settlement costs, buying down the mortgage rate can be a superb way to take advantage of the funds available. In both cases the amount is usually limited to a percentage of the loan amount, so you will want to make certain that the other necessary closing costs are covered, and then any remaining amount may be able to go towards mortgage points. Check to make sure that discount points are an allowable use of the seller paid settlement costs or relocation assistance.
Whether or not to pay points often comes down to running the numbers. Your Orlando mortgage professional can assist you calculate how many months it would take to break even when accounting for the additional up front costs. You also may choose to ask a tax professional regarding the tax implications of paying points or additional interest as part of your monthly installment.
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