Acquire The Right Orlando Home Loan For Your Requirements

A "mortgage point" is equal to 1 percent of the loan amount, and is at times paid to acquire a lower interest rate on a home loan. Orlando mortgage borrowers can also sometimes choose to take a slightly higher rate and receive a credit from the mortgage company to cover some or all of the settlement costs on the loan. It could be a tough decision whether to pay points or "buy down" the rate on a home loan. Ask yourself the following 5 questions to help sort through some of the confusion:

1) How long do I plan to own this home?

The longer you keep the mortgage loan the longer you will need to take advantage of the lower rate. If you sell or refinance a year or two down the road the lower rate will most likely not have generated significant cost savings.

2) Can I afford the additional up front charges?

Make sure you can cover your down payment, closing costs, and maintain the required reserves, or savings, needed to qualify for your loan before you consider paying points. When buying a new home it's also a smart idea to have a moving fund reserved for moving expenses and purchasing additional items you might not realize you need until you're in the home.

3) Who is paying the closing costs?

If you are moving for work and your employer is paying your settlement costs as part of a moving package, or the seller of the home you are purchasing has offered to cover the closing costs, buying down the mortgage rate can be an excellent way to reap the benefits 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 paid for, and then any remaining amount may be able to go towards mortgage points. Check to ensure that discount points are an allowable use of the relocation assistance or seller paid settlement costs.

Whether or not to pay points usually is dependent on running the numbers. Your Orlando mortgage professional can help you calculate how many months it would take to break even when accounting for the additional up front charges. You also might want 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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