Orlando Mortgage Blog

Here's a thought everybody. If you've been waiting for that magic rate to appear, it probably already has...you may have to pay a point or so to get it, but these are historic levels and the bang for your points buck is fantastic at the moment. Don't miss the boat for lack of a ticket. Here's some food for thought folks:

A basic $200,000 mortgage compared on two different rates:

• 5.375%/0.00 point 360 months  = $1,119.94 P&I payment
• 5.000%/1.25 point 360 months  = $1,073.64 P&I payment 

The 1.25 point example reduces the payment $46.30 monthly now, but requires 1.25 point ($2,500) to be paid at closing or rolled in the loan with sufficient equity (as in the case of a refinance). Divide $46.30 monthly savings into the $2,500 one time cost, to get the 5% rate, and you recover the cost in just 54 months (4.5 yrs). On a purchase you can ask the seller to help you by paying the points for you. That becomes another negotiating opportunity.

Think about it. Where can you invest $2,500 one time and earn (save in this case) $46.30 every month ($555.60 yearly vs. $2,500 one time) from the 55th month onward and your payment starts at the lower level the first month. If you invested $2,500 today you would have to earn an annualized pre-tax yield of a little over 22% to get that same return. So please don't automatically say you would never pay points. What points will buy varies day to day so ask for an update.

Bill Wilbanks

Orlando Mortgage Masters