Wow, what a great
interest rate!Or is it??
Not too long ago we saw historically low
interest rates. Rates dipping below 6%, even lower than 5% seem
incredible, especially when I recall a time when rates soared
over 18%. I remember how thrilled I was in 1982, to find an
owner/builder willing to finance the home we were purchasing
from him, at 10%.
Even though rates aren’t quite as low as they were, they are still good.
And while rates are relatively low, borrowers need to clearly
understand the rate their lender is quoting. Are you buying
down the interest rate? Is your lender charging you 2 points to
get that 5% rate? 3 points?
4
points? 5 points?
And what exactly is a point? A point is 1% of the loan amount.
So, is that a really great rate? Or are you paying a fortune in
points? Buying down your interest rate might be to your
advantage, and then again, maybe not.
If (for example) you pay 4 points to buy down the
interest rate on your loan of $150,000, you need to ask yourself
if the $6,000 expense will save you sufficiant interest during
the time you have the loan. For each percentage point you
buy down, it will take about one year to recoup the cost of one
point.
Other Links of interest
http://www.havasumagazine.com/RE/FHALoans.htm
http://www.havasumagazine.com/RE/conventionalloans.htm
http://www.havasumagazine.com/RE/Buying.htm
http://www.havasumagazine.com/RE/Selling.htm
http://www.havasumagazine.com/RE/loans.htm
http://www.havasumagazine.com/RE/VALoans.htm
http://www.havasumagazine.com/RE/FAQ.htm
http://sanerealestate.com/Mortgage.htm