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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:

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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.

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  • 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

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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.

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Statistically, it is almost always better to opt for the mortgage with zero points and zero fees

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Contact me for a quote on your cost-free refinance or purchase loan:

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Big banks are the 'retail' side of the lending industry. These companies rely on their ubiquity to capture your trust, but they often have high overhead, limited flexibility in their terms and pricing, and run like a bureaucracy. They may not be the best when it comes to rate, fees and service.
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The independent broker, on the other hand, is the 'wholesale' side of the mortgage business. We have greater flexibility in our pricing because we have the ability to shop your loan with multiple lenders and we independently control our commission structure. Brokers sell the same financial products, but we operate autonomously; in fact, the name brand mortgage companies you see advertised regularly on TV and radio are often the same lenders with which we have relationships - and a better price!
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Closing Cost Credits
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Big banks play by different rules than the independent broker and are not required to disclose to their borrowers how much money they make on each loan. Brokers, however, are legally required to disclose our commissions and have the ability to rebate any excess toward buyer closing costs.  This means that brokers can offer the same rate while eliminating 3rd party costs that banks often won't. A low rate with a big credit for closing costs from a broker is a better deal!
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Getting the best mortgage is a combination of the rate, the fees, and the service.  Give me a call and I'll help you purchase or refinance your property with transparency and superior service!

Retail Banks vs Wholesale Brokers

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