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Choose The Right Orlando Mortgage For Your Needs
A "mortgage point" is equivalent to 1 percent of the loan amount, and is at times paid to obtain a lower rate of interest on a home loan. Orlando mortgage borrowers could also at times choose to take a slightly higher rate of interest and receive a credit from the mortgage company to cover some or all of the settlement costs on the loan. It can be a tough decision whether to pay points or "buy down" the interest rate on a home loan. Find the answers of the following 5 questions to help sort through some of the perplexity:
1) How long do I decide to own this home?
The longer you keep the mortgage loan the longer you will have to benefit from the lower rate. If you sell or remortgage a year or two in the future the lower rate will most likely not have generated significant financial savings.
2) Can I afford the additional up front expenses?
Be sure you could cover your down payment, settlement costs, and maintain the necessary reserves, or savings, needed to qualify for your loan before you think about paying points. When buying a new home it's also a smart idea to have a moving fund set aside for moving expenditures and purchasing additional items you may not realize you require until you're in the home.
3) Who is paying the settlement costs?
If you are moving for work and your employer is paying your settlement costs as part of a relocation package, or the seller of the house you are purchasing has agreed to pay the closing costs, purchasing down the mortgage rate can be a superb way to reap the benefits of the funds at your disposal. In both cases the amount is usually limited to a percentage of the loan amount, so you will want to be sure that the other essential settlement costs are paid for, and then any leftover amount may be able to go towards mortgage points. Check to make certain that discount points are an allowable use of the relocation assistance or seller paid closing costs.
Whether or not to pay points generally is dependent on running the numbers. Your Orlando mortgage professional can help you determine how many months it would take to break even when accounting for the additional up front charges. You also may want to ask a tax professional regarding the tax implications of paying points or additional interest as part of your monthly payment.
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