RATE POINTS

When people want to find out how much their mortgages cost, lenders often give them quotes that include both loan rates and points.

A point is a fee equal to 1 percent of the loan amount. A 30-year, $150,000 mortgage might have a rate of 7 percent but come with a charge of 1 point, or $1,500.

A lender can charge 1, 2 or more points. There are two kinds of points — discount points and origination points.

Discount points: These are actually prepaid interest on the mortgage loan. The more points you pay, the lower the interest rate on the loan and vice versa. Borrowers typically can pay anywhere from zero to 3 or 4 points, depending on how much they want to lower their rates. This kind of point is tax-deductible.

Origination fee: This is charged by the lender to cover the costs of making the loan. The origination fee is deductible if it was used to obtain the mortgage and not to pay other closing costs. The IRS specifically states that if the fee is for items that would normally be itemized on a settlement statement, such as notary fees, preparation costs and inspection fees, it is not deductible.

How do you decide whether to pay points, and how many? That depends on a number of factors, such as how much money you have available to put down at closing and how long you plan on staying in your house.

Points as prepaid interest reduce the interest rate, an advantage if you plan to stay in your home for a while.

But if you need the lowest possible closing costs, choose the zero-point option on your loan program.

A lender might offer you a 30-year fixed mortgage of $165,000 at 6 percent interest with no points. The monthly mortgage principal and interest payment would be $989. If you pay 2 points at closing (that’s $3,300) you can bring the interest rate down to 5.5 percent, with a monthly payment of $937. The savings difference would be $52 per month. But it would take 64 months to earn back the $3,300 spent upfront via lower payments. If you’re sure you will own the house for more than five-and-a-half years, you save money by paying the points.

Testimonial

I have been involved in the real estate industry for almost 30 years. I had a tough situation on my own loan that nobody I knew said they could get it done. I contacted Wes after receiving a mortgage email from him. He said he could do the refinance for me, gave me the terms & I was shocked that he could do what nobody did for me.

All the terms and costs were exactly as originally given to me. His team and assistant were always prompt to answer me. I would recommend him to all of my clients. I am currently a realtor in California and Arizona.

Marc & Ginny Stigen

Client

Why Choose Us

N

Every program available to close a loan (Full Doc with low rates, Jumbo lending, Full stated products or Non-QM with bank statement program or DSCR program

N

Been in business since 2003 so have the knowledge of structuring hard to close loans

N

Upfront and tell it how it is

Start Your Loan Application

Ready to start your loan application process? Simply fill out this contact form and one of mortgage brokers will be in contact with you in a timely manner.

At The Funding Group we deliver the absolute best lending experience through knowledge, communication and care.

Our mission supports the growth and strength of our communities and provides a pathway to the dream of home ownership.

Address

451 N Canon Dr Suite 1
Beverly Hills California 90210

Email

wesley@thefundinggroup.com

Phone

(310) 903-2269

Copyright © 2021The Funding Group