Do you buy a rate down or not? Rates are low... is it worth paying a 1/2 point to 1 point to buy the rate lower?
This depends on what your Return On Investment (ROI) will be. To calculate this have your principal and interest payment with out buying it down. Also you will need what your payment would be with buying it down. The next number you need is your cost to buy it down (your 1/2 to 1 point -- please note a point is 1% of your loan amount).
Subtract the lower payment from the larger payment.
Divide the points by the difference in the payment.
Divide this number by 12.
This is your ROI in years. You want this number to be as low as possible to have it make sense. The rule of thumb is between 2 - 4 years. But it will depend on you short and mid-term goals, your current equity position and/or liquid assets.
This may sound confusing but it is easily shown with real numbers. For a ROI calculation on your specific scenario contact me via my website at: http://www.new-hampshire-home-mortgage.com
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment