How to Reduce Monthly Home Payment?

Most of the new home buyers would like to learn how they can reduce their monthly home payment. Here is a good article that you will discover how to reduce monthly mortgage payment of your home with discount points. You will learn how discount points work, why they may help you or if they are tax deductible.

Discount points are fees paid to a lender in order to purchase a lower interest rate. This process is also known as a “rate buy down” and the net result is a lower monthly mortgage payment over the life of the loan.

One point is 1% of the loan amount. So the cost — paid at closing — for one point on a loan of $100,000 is $1,000. Typically, one point will lower the interest rate .25% to .375%, depending on the type of loan.

Sometimes it makes sense to consider purchasing discount points at closing and sometimes not a good idea that depends on a number of factors. Usually, it is best to avoid discount points if a client will be in the home less than four years, is applying for an adjustable rate mortgage or plans to refinance within a few years. Discount points are generally a good idea if the homebuyer plans to remain in the home over five years and is not planning on refinancing in the near future. It is very important to know how long you are oging to live in this particular property, of course plans can be change over the years however if oyu have an idea it will help you tremendously during home buying process.

When considering discount points, it’s best to look at a break-even analysis. This could be done by calculating the monthly mortgage payment with no points, then subtracting the monthly mortgage payment with points. The difference is the monthly savings. Then divide the cost of the discount points by the savings. The result is the number of months until the homebuyer breaks even. Your loan officer will be happy to help you on this.

Discount points for residential property are tax deductible in the year they are paid. Discount points are available when refinancing, but those are deductible over the life of the loan. It’s best to advise home owners to consult with a tax advisor regarding the details of these deductions.

If you are looking for homes in Dallas, Frisco, McKinney, Carrollton, Plano and surrounding areas, feel free to contact me. There are great deals out there!

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