Never Pay Points & Fees for a Mortgage
Want to know why you should (almost) never pay points or fees to get a lower rate on your mortgage?
Any fees you pay to obtain a home loan will either come out of your pocket now, or be added to your loan balance and financed. You need to consider that recovering those costs comes in the form of any proposed savings on your future mortgage payments, so you’ll need to make sure you keep the loan long enough that those costs actually pay off.
Here’s an example:
Say you are given the option to get a 30-year fixed-rate mortgage of $350,000 with a rate of 3.5% with $3,500 in loan costs vs. a 3.75% rate with zero loan costs.
At 3.5% the monthly principle and interest payment is $1,571.66
At 3.75% the monthly principle and interest payment is $1,620.91
Yes, the lower interest rate will save you nearly $50 each month; but it will take almost 6 years before you will have recovered the $3,500 you paid for the lower rate! And if you opted to finance those loan costs by adding that $3,500 to your loan balance, it will take you more than 8 and a half years to see any savings!
Data from the National Association of Realtors in 2019 suggested the typical homeowner lived in their property only 9 years before selling; and the typical homeowner refinanced their mortgage even more frequently.
Statistically, it is almost always better to opt for the mortgage with zero points and zero fees
Contact me for a quote on your cost-free refinance or purchase loan: