Mortgage Refinancing – Should You Pay Discount Points
Mortgage Refinancing – Should You Pay Discount Points
by Louie Latour
Discount points are a fee you pay when closing on your new mortgage in exchange for something like a lower interest rate or more favorable terms. Should you pay discount points when refinancing your mortgage? Here are several tips to help you weigh the pros and cons of paying discount points when refinancing your mortgage.
I’ve never cared much for paying discount points when refinancing a mortgage. One point is the equivalent of 1% of your loan amount, money that you have to come up with at closing. While it’s true you might gain a tax deduction by paying these points, you could probably put a list together with a hundred better uses for this money.
Should you pay discount points when mortgage refinancing? Your decision should hinge on what you’re getting in return for your money and how long it will take you to recoup the expenses. To determine if paying points makes sense divide how much you will pay by the amount you will be saving with a lower mortgage payment. This figure will tell you the number of months it will take you to recoup the cost of paying discount points.
What happens if you decide to refinance your mortgage again down the road? The average homeowner refinances their mortgage every five to seven years and if you paid discount points on the previous loan, you’ve just thrown that money out the window. If you plan on sticking with your new mortgage and don’t ever plan on borrowing against your home equity, paying discount points could save you money in the long run. Discount points are a long term investment; however, there are probably better uses for your hard-earned cash. You can learn more about your mortgage options with a free mortgage tutorial.
To get your FREE six-part Mortgage Refinancing Tutorial, visit RefiAdvisor.com using the link below.
Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. To get your hands on this free video tutorial: “Mortgage Refinancing – What You Need to Know,” which teaches strategies for finding the best mortgage and saving thousands of dollars in the process, visit Refiadvisor.com.
Claim your free mortgage refinancing tutorial today at: http://www.refiadvisor.com
Article Source: http://EzineArticles.com/?expert=Louie_Latour
[tags]Mortgage Refinancing, Discount Points[/tags]
Related posts: