Search
Recommended Sites
Related Links






   

Informative Articles

3 Tips For Keeping Proper Tax Records For Your Home Business – And Keeping The IRS Happy!
The last thing most people think about when starting a business is doing taxes. But proper planning will make doing your taxes much easier - and keep the IRS happy! Here are 3 simple tips for keeping proper records: 1. Whenever you buy anything...

Bookkeeping Scares Me!
Does the thought of bookkeeping scare you? Do you dread sitting down at your computer and entering all your receipts, deposits, and making sure everything is documented right for taxes? Never fear, there is a new, more affordable solution to...

Overcoming Procrastination
Procrastination can work for you as well as against you. Identifying which category each procrastination item fits into lessons overwhelm and assists in getting things done in a timely manner. By letting go of a lot of negative self-talk we can use...

Refinance Rental Property - Don't Sell It
You own a rental property for years, and never see the "big pay-off." Is it time to cash in on your investment, now that you've paid down the mortgage, and values are up? Maybe not. The Problem With Selling Selling means you'll have to pay a...

Small Business Collection Agencies Get You Paid
If you're like many small business owners, the mountain of debt you accumulated during startup might have been enough to make you worry about collection agencies every time you answered the phone. But your feelings toward collection agencies are...

 
Discount Points May Be Wise When Purchasing a Home


There are many expenses one must pay when closing on a mortgage. Some of these include taxes, a down payment, loan origination fees, and miscellaneous fees for couriers, copying or other office expenses. No one likes paying these costs, but they are part of the process of taking out a loan. There is one item that can be paid for at closing that may be worthwhile, however, and that is something known as "discount points."
Discount points are a fee paid to the lender in order to reduce the interest rate on the mortgage. A "point" is one percent of the loan amount; in exchange for paying one or more points, the interest rate on the mortgage may be reduced by an agreed upon amount. Since this fee can easily run in the thousands of dollars, it would make sense to first determine if it is a good idea to pay the lender to reduce the interest rate.
The key to this equation consists of two parts – how much the monthly payment will be reduced if you pay the points and how long you will keep the mortgage. Most people have some notion of how long they intend to remain in the house they are buying, but it is more difficult to determine how loan you will keep the loan. After all, if interest rates drop dramatically, you may elect to refinance the mortgage, which would retire the existing one.
When closing approaches, and you are considering "locking in" your interest rate, ask your lender if you can reduce the rate by paying points. After he or she outlines the available options, ask them how much the monthly payment would be reduced if you paid the points. After that, divide the cost in points by the monthly savings. The answer will be the number of months that you will have t keep the loan to break even. If you think you will keep the mortgage for that long or longer, then you should probably pay to reduce the interest rate if you can afford to do so.
Even a savings of $20-30 per month can add up over the life of a 30 year mortgage, so it is well worth your while to see if you can lower the payments. Why pay more than you have to?

About The Author

©Copyright 2005-06 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including http://www.homeequityhelp.net, a site devoted to information regarding home equity lending.

Sign up for PayPal and start accepting credit card payments instantly.