every $100,000). Essentially, you pay some interest upfront in exchange for a lower interest rate over the life of your loan. In general, the longer you plan to own the home, the more points help you save on interest over the life of the loan. Keep in mind, one point does not equal 1%. One point equals anywhere from .125% to .25%, depending on the type of loan. It’s possible to buy the points to ensure the interest rates are low when you’re getting the loan, thus making your monthly payment lower. Buying the points can help you down the line by guaranteeing that you save money, especially if you plan to stay in the house for an extended period. There are also other creative ways to save money in interest over the length of the loan without buying down points. One example is cutting your mortgage in half and paying it every 2-weeks, resulting in 1 extra principal payment a year. Make sure to talk to your lender about these types of options. Further related to taxes and property ownership is that once you own a house, you’re a property owner, with the attendant obligation to pay property taxes. The usual method of paying property taxes is to escrow the amount of annual taxes within the mortgage payment. The mortgage servicer will pay the taxes as they are due. When buying a house, your lender will calculate the total amount of real estate taxes, as well as the number of days in a property tax year that you were the owner of the said property and escrow that amount, adding it to the mortgage payment. People have been known to spend months looking for the best possible home and eventually find a good one. However, many of these individuals fail to understand the importance of finding a good loan. In the end, the new homeowner has a nice home, but a bad deal when it comes to the mortgage.
69
Powered by FlippingBook