Home Mortgage Rate Quote

What are discount points? - Discount points are fees paid to the lender at closing.Most times they are paid for a lower interest rate. One point is equal to 1% of the total loan amount. As an example, a $150,000 loan, one point would equal $1500. Most lenders charge between 1 and 2 points for a lower rate.

Many homebuyers will ask the seller to pay a discount point for them. That is a great way to have the seller assist you in getting a below market interest rate on your purchase.

Discount points are Tax deductible, while Origination point are not usually Tax deductible.

Discount points are paid by a borrower to obtain a lower rate on their mortgage. Discount points are generally only recommended when you plan on staying in your current mortgage for many years. Sometimes discount points may be necessary to lower the rate on your mortgage so that you meet a lenders DTI (Debt to income Ratio) guidelines.

When considering how many discount points you should pay to lower your rate, have your mortgage professional calculate the Break Even point for each option. The break-even point is the amount of time it will take for your monthly savings to add up to the cost of each additional discount point.

Discount Points are also referred to as "Prepaid Interest". You are paying your interest upfront at closing, rather then over the lifetime of the loan. If you are planning in staying in your home for a long period of time, then paying discount points up front may benefit you in the long run. Consult your mortgage professional to see if paying discount points are right for you.

Refinance To An Option ARM Loan - Many homeowners have found strong benefits to refinancing to a pay option ARM loan. These loans do have a downside so make sure that the mortgage agent that you work with fully explains how these loans work and whether such a loan would be right for your individual situation. Despite the risks involved, thousands upon thousands of homeowners have refinanced into these loans to take advantage of the flexibility and cash flow benefits that they offer.

The biggest risk with the option arm is the potential for negative amortization. Basically, this means that your loan balance can go up over time, rather than down. The reason this is possible is that there is a 'minimum payment' option, where you make a payment based on an interest rate that is lower than your real interest rate. When you do this, the difference in your interest payments between the two different interest rates is added to your loan balance.

One of the risks of a Pay Option ARM is that some of the payments are based on a 1-month adjustable rate. While the adjustments are relatively small this is still a feature to be aware of in any type of market.

Debt reduction plan - This is a strategy for those homeowners who would like to use some of their home equity to consolidate debt. The purpose is to lower monthly debt payments so that it is easier to pay your bills.

It is important that you realize that by consolidating debt you are not actually reducing it. You may hear advertisement on the radio offering refinance loans to 'eliminate debt'. The fact is, you are increasing your debt. When you refinance your home, you will have to pay closing costs for the new mortgage, which are usually added to the loan balance. However, the interest rate you will receive on your mortgage will be far lower than on your high interest debt, so you will pay less each month in interest.

If you don't have enough equity in your home to consolidate the debt you have you may want to consider refinancing to a mortgage that has lower payments. A Pay Option ARM may be a good choice for you. One of the many features of this loan is a low minimum payment based on around 2%; this can usually save you around 40% of a traditional 30 year fixed payment. The huge additional savings can be used to pay off those additional debts.

There are many different program choices and loan types that you can use to reduce your debt with the equity in your home. One of the most common choices is through the use of a HELOC, or home equity line of credit. Many times the interest on a HELOC can be tax deductible and the rates are much lower than those of credit cards. Consolidating your debt with a home equity line of credit can provide you with monthly savings and possible tax deductible interest. You should consult a tax adviser or accountant to discuss the tax deductibility.

Once you have reduced your monthly debt payments, it is important that you don't rush out and max out your cards again, buy a new car, or otherwise incur more new debt. The idea of reducing your debt is not so that you can gain more debt, it is so that you can have greater cash flow, and pay off the debt that you already have.