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Look For The Suitable Orlando Home Loan For Your Requirements
A "mortgage point" is equivalent to 1 percent of the loan amount, and is sometimes paid to acquire a lower interest rate on a home loan. Orlando mortgage borrowers could also sometimes prefer to take a slightly higher rate of interest and receive a credit from the mortgage company to cover some or all of the closing costs on the loan. It could be a tough decision whether to pay points or "buy down" the rate on a home loan. Find the answers of the following 5 questions to help sort through some of the confusion:
1) Just how long do I decide to own this home?
The longer you keep the mortgage the longer you will need to take advantage of the lower rate. If you sell or remortgage a year or two down the road the lower interest rate will most likely not have generated significant financial savings.
2) Can I afford the additional up front costs?
Make sure you can cover your down payment, settlement costs, and maintain the required reserves, or cost savings, needed to qualify for your loan before you think about paying points. When buying a new home it's also recommended that you have a moving fund reserved for moving expenses and purchasing additional items you may not realize you need until you're in the house.
3) Who is paying the settlement costs?
If you are moving for work and your employer is paying your closing costs as part of a moving package, or the seller of the home you are purchasing has agreed to cover the settlement costs, purchasing down the mortgage rate can be a superb way to take advantage of the funds available. In both cases the amount is generally limited to a percentage of the loan amount, so you will want to be sure that the other required closing costs are covered, and then any leftover amount may be able to go towards mortgage points. Check to make sure that discount points are an allowable use of the relocation assistance or seller paid settlement costs.
Whether or not to pay points usually comes down to running the numbers. Your Orlando mortgage professional can assist you determine how many months it would take to break even when accounting for the additional up front expenses. You also may choose to ask a tax professional about the tax implications of paying points or additional interest as part of your monthly payment.
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