Tehama Country Real Estate

Tehama Country Real Estate – 3 What Is 'Buying Down Points' and How Can That Help Me? Real Estate Spotlight By Alex Mason electing and signing for a real estate mortgage is a tough job filled with research, questions and some home study before signing on the dotted line. S A good loan officer will evaluate your unique situ- ation to include how many years you intend to live in your new home, recommend a type of mortgage to match your fixed or fluctuating monthly income, and offer you the opportunity to lower your interest rates and reduce your monthly payments with the "buying down points" technique. In some cases, buying down points is the best approach to home financing, and the purchaser may wish to wait an extra few months to save the addi- tional cash to get the discount. Ask your loan officer what he or she recommends for your current and future financial status, and ask them to formulate a plan especially for your unique and individual situa- tion. WHAT IS BUYING DOWN POINTS ON AMORT- GAGE? Buying down points is a means of financial lever- age to plunk down some extra cash at the time of your signature in exchange for a favorable adjust- ment to your interest rate. Each buy-down point equates to one percent of the balance financed, so if you have a $500,000 loan bal- ance, each point would cost you $5,000. HOW IS BUYING DOWN POINTS HELPFUL? Buying down points may be an uncomfortable amount of cash out of pocket in the beginning, but over the life of the loan, the home owner will enjoy substantial savings and may be able to pay the mort- gage off early. Although the monthly savings may be less than $100, the long-term financial strategy is to keep your money in your wallet where it belongs. It may take several years to recoup your initial cash investment of buying down points, but a mortgage will follow you most of your life. It's important to consider your future income and retirement funds available in your later years. WHAT IS THE BEST MORTGAGE SITUATION FOR BUYING DOWN POINTS? The home buyers who will benefit the most from buying down points are those who intend to keep the home for a longer length of time and opted for a fixed mortgage for twenty, thirty or forty years. Because the buying points policy takes nearly a decade to recoup the investment, the home owner will not see a significant amount of mortgage pay- ments saved unless he or she remains in the property for close to or exceeding the life of the loan. WHO IS AN IDEAL CANDIDATE? Home buyers who earn a fixed income, such as a standard salary that may or may not include bonus- es, have a dependable cash flow and can plan for their future mortgage payments from a pattern of monthly income. However, home buyers that earn their living through sales commissions or experience highs and lows with seasonal cash flow months may wish to explore buying down points to counter against tough times down the road. In addition, it is important to understand your retirement package and all its benefits to carefully calculate what is going to be a comfortable monthly output on a mortgage in case your property is not paid off when you retire. If you are purchasing a home and your retirement will come before paying off the loan balance, it's smart financial shopping to use the buying down points program to enjoy a lower monthly payment and reduced balance at the end of the loan. Alex Mason is a former real estate agent and mortgage bro- ker living in Los Angeles.

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