Should You Pay Points on Apopka Florida Mortgages

There are many mortgage products available on the market, each with its own pros and cons. In addition to the type of mortgage, you may be presented with other options, such as paying points. It's important to understand the full impact of such options before you make a decision. When deciding whether you should pay points on Apopka Florida mortgages, consider the following...

What are Points

Points allow you to obtain a lower interest rate over the life of your loan. One point equals one percent of your loan amount. It's pre-paid interest, so essentially, you're paying interest up-front in exchange for paying less interest over time. For example, perhaps 1 point drops your interest rate by a quarter percent.

How the Numbers Work Out

Since points are pre-paid interest, it's important to look at how much points on Apopka Florida mortgages actually saves you and how much time it takes before those savings kick in. For instance, if you pay $4,000 in points and get a slightly lower interest rate that saves you $100 per month, it will take 40 months for you to start actually saving money. Why is that? Because if you didn't pay those points, you would be paying $100 more each month and it would take you 40 months to have spent that same $4,000. 

Should You Pay Points on Apopka Florida Mortgages

So now that you understand how points work and when they start actually paying off, it's time to ask yourself, "do I plan on keeping this mortgage for more than 40 months?" If you plan to refinance or sell your home in 2 years, then it doesn't make sense to pay points. Paying the extra $100 per month would only cost you $2400 over those 2 years (instead of the $4,000 you would be paying up-front). On the other hand, if you kept the home for 5 years, you would save ~$2,000 (month 1-40, you save nothing since you pre-paid it via the points; month 41-60, you save $100/mo). 

By evaluating this financials, you can make smarter decisions about how you spend your money and whether you should pay points on Apopka Florida mortgages. Follow our blog for additional tips on mortgages and other home buying topics. If you're looking to buy or sell a home in the Apopka Florida area, give us a call!

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