Understanding Mortgage Points and Fees: 3CALoan
Mortgage points and fees are very simple to understand. Mortgage points are also known as mortgage home loan points or mortgage discount points or origination points. It a way of saying a percentage point of the home loan amount. Mortgage point is basically based on the total home loan amount.
How much do mortgage points cost?
If your loan lender or mortgage broker will say that they are charging you one mortgage point then they actually want to say 1% of your total home loan amount. If your total home loan amount is $300,000 then cost of one mortgage point will be $3,000. And If your loan lender will charge two points, the cost will be $6,000.
Types of Mortgage Points
Your loan lender will charge the home loan mortgage points and fees for doing the home loan. These points are known as the home loan origination fee. This will be not included in your home loan closing cost but it will be included in the lump fee that covers the commission of the loan lender and all your home loan closing cost.
Alternatively, there is pre-paid interest in exchange for a lower interest-rate which you may be charged as mortgage discount points. These types of mortgage points and fees are tax deductible.
If there are no mortgage points and fees mentioned that doesn’t mean that you’re getting a better deal. Your loan lender or mortgage broker will charge that points will charge the mortgage points and fees on the back-end of the deal. In other words, the lender is paying the broker a certain percent for a rate higher than the market rate.
How Your Loan Lender Earn Commissions
In this process, your loan lender earns a commission without charging you directly. You will still pay the price by taking a higher mortgage rate than necessary, which leads to more interest paid -throughout the life of the loan.
When does buying points make sense for you as a homebuyer?
If you will stay in your home for a longer period of time than it will take to recapture the upfront cost of buying points. Generally, to reach a break-even point, you have to wait for at least five years.
How to calculate your break-even point?
Take the price of your points and divide that amount of price by how much you would save on your mortgage by purchasing points in one month. The number you will get will tell that for how many time period you have to wait in order to recoup the money you paid for your points. If you want to reach the break-even point, then you should own the home for a longer period of time.
Final Thoughts
To find out more information about the mortgage points and fees or If you still have any doubt, you can contact us at (818) 322-5626 or (818) 3CA-Loan today! Buying a home together is a great investment, but you have to be careful and avoid making any costly mistakes. Our goal is to provide opportunities for people to meet their financial goals. We help our customers every step of the way. We prioritize informing and educating our clients about the home loan process. Our competitive rates, efficient services, and talented team can help ease the loan process.
Our client’s happiness and confidence upon closing a deal reflect our excellent quality services. 3CALoan local mortgage broker provides no tax return home loan which is also called no tax return, without tax return, private hard money home loan, private hard money loan, bank statement home loan, bank statement loan, equity loan and many more. We will run you through the details of home loans and hold your hand throughout the process.
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