Should You Pay Points When You Refinance Your ARM

Minggu, 30 Mei 2010

When you finally deiced it is time to refinance an adjustable rate mortgage you are more then likely going to try and get the best deal on your loan

Getting the best deal is by far the one thing on every ones mind when it comes to refinancing. The best deal is regarded by many as getting the lowest interest rate. One of the best ways to get the lowest refinance rate is to pay points on your loan.

If you are going to get another adjustable mortgage you will want t o make sure you do not make any wrong choices that could wind up costing you money

Points are a percentage of the total loan amount paid to the lender for a lower rate. What you need to do is figure out how much you will save every month by paying the points. Then multiply that amount times the amount of months that you have a fixed rate.

If the amount you calculated works out to be a lot more then it cost you then paying points on an ARM would probably be in the best interest to you. However do not just base this on the amount of points paid, this is because when you pay points many mortgage companies lose there back end commission from the lender and have to charge you an origination fee up front.

This origination fee is normally one percent of the loan amount so it can wipe out any savings that you may see from paying points.

To get an accurate calculation ask your mortgage broker for a detailed good faith estimate and run the numbers with both origination fee and points paid for a lower rate.

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