Colorado Springs Real Estate Facts & Fun

When contemplating whether or not to buy down an interest rate on your new mortgage there are more things to consider than simply the cost of the points.  It's easy to look at the lower interest rate as the bottom line and automatically figure you are saving money, however this is not always the case.  Allow me to shed some light on the subject.

 A point is essentially up front interest used to buy down the percentage rate on your mortgage, and usually costs just over 1% of your total purchase price.  On a $200,000 mortgage you may expect to pay about $2100 for 1 point.  How much that point buys down your mortgage greatly depends on what your loan officer can do that day.  But don't be misled, 1 point doesn't buy a whole 1 percent off your interest rate.  One point will typically buy your interest rate down 1/8 to 1/4  of a percent.  Lets look at the better case scenario.

 You are purchasing a home for $200,000, you have decided to buy one point for $2100 dollars.  And this one point buys your interest rate from 5.25% to 5.0%.  Before the point your principal and interest payment was going to be $1050 per month.  With the one point your payment would be down to $1000, saving you $50 per month.  That's a pretty substantial savings, on this particular example, but how long will it take to get your money back??  You got it, 3 1/2 years.  For those who intend to stay in the same home for the long haul this $2100 point is a good investment.  It takes 3 1/2 years to get your money back, but you do save $50 per month for 26 1/2 years if you keep that loan for your full 30 year fixed mortgage.  That's $15,900 dollars you will have saved on interest!  Definitely nothing to sneeze at!

Looking at the other side of things.  If your the type that likes to move, your a military member, your planning to expand the family or see yourself in a different financial situation in the near future and may want to upgrade buying that point may not make sense.  Do consider your long term goals when deciding whether or not to buy a point on your mortgage.

 These numbers are very basic and rough estimates.  Your loan officer will be able to provide you with up to date information about buying down your interest rate, and help you punch the numbers so you have a clear picture of your how much money you will lose or save in your unique situation.  Me?  I can help you negotiate the best deal possible on your dream home, and work to get the seller of that home to pay those discount points and closing cost for you!  Then you would have no contemplating to do as to whether or not to buy a point, right?  When your not the one paying for the point every penny your mortgage payment is lowered is savings from day one!  Lets buy a house!