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Paying Points for Lower Mortgage Refinancing Rates
When going through the process of mortgage refinancing your Boston mortgage loan, you may find that you can pay points to get a lower interest rate. In the process of mortgage refinancing, a mortgage company will usually offer you several different interest rates and you can essentially "buy" a lower interest rate. A point is worth one percent of your loan.
A good example is if you are considering a $100,000 mortgage loan. If a point is worth one percent of the loan, then the point is worth $1,000. If you pay for three points, you are paying $3,000 up front for these points. This same concept can be applied in mortgage refinancing as well.
Analyzing the different interest rates available to you and the amount of the loan that you are considering may be a way to save you on interest. However, you should determine whether or not it will be worth it to purchase these points to get a lower interest rate. Some companies will offer mortgage refinancing with no points, but their interest rates are often higher as well.
To decide the right combination of interest rate and points is good for you will depend on the amount that you can afford to pay up front as well as the amount you can afford to finance. The less time that your loan is for, the more expensive your points will be. But, if you plan to stay in the house for a long period of time, then it may be worth it to you to pay for the points and get the lower interest rate.
Many companies will finance the points out for you. SO, instead of paying $3,000 down, you may be able to finance out $103,000. The cost of the points is added to your mortgage refinancing loan and you pay a finance charge on those points. This may enable you to receive the financing you need, but at the same time your monthly payment may go up depending on how long your loan term is.
Deciding whether or not it is worth it to you to pay points when mortgage refinancing is a personal decision and will depend on how much a lower interest rate is really going to save you after you pay for the points upfront or finance them with the rest of your mortgage loan on your Boston home.
