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how much will 1 poing lower a 3.75 interest on a 200,000 mortgage?

how much will 1 poing lower a 3.75 interest on a 200,000 mortgage? by timefr_451_969 from Portland, Oregon. May 30th 2012 Reply


Michael Eiden (MichaelEiden)
#30 ranked lender in Oregon - 23 contributions

Hello, thanks for your question. Right now it's roughly a 1/4 percent or .25%. In other words, you could be looking at 3.5% for a 30 year fixed. That equal about a $28 difference in payment. So... your breakeven is roughly 71 months. ($2,000 for the extra point divided by the savings of $28). Hope that helps, good luck. If I can be of further assistance, my contact info is in my profile.

May 30th 2012
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William J Acres (William_Acres)
#1 ranked lender in Arizona - 8,620 contributions

As you can see by the responses, there's no concrete answer.. It really depends on a lot of factors combined.. What type of loan are you talking about... FHA, VA, USDA, Conventional. What term? 30 years, 20 years 15 years. Fixed rate or adjustable. What are your credit scores.. what is the home's value, is an appraisal being done, is this a purchase or a refinance... as you can see, there's a lot of info missing to properly answer your question.. the best thing you can do is to get your quotes directly from a lender who is familiar with your COMPLETE scenario... that way there is no guessing.. The best advice I can give you is to contact a LOCAL mortgage broker, not the local "Big" bank, and certainly not one of those 50 states internet lenders...By applying with your LOCAL Broker, you have an advantage because he's familiar with local customs and works with numerous lenders, seeking out the best loan terms for your particular scenario. Because he has lower overhead, he can offer you lower rates and lower fees than most of the larger lenders.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

May 30th 2012
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Brian Neuwirth (Bneuwirth)
#49 ranked lender in Colorado - 28 contributions

This is a difficult question to answer. Rates are acquired from the bond market and vary depending on market conditions. I can't answer this question for all lenders but under current market conditions if you were wanting to lower your rate wit Total Lending it costs for lowering your rate from 3.375 to 3.625 on a conventional loan today is a cost of .525. Please keep in mind this does not account for adjustments to the rate for the itmes mentioned abouve if any of them apply to your situation. If you are looking at a governement backed security (FHA or VA) the best rate TLC would be able to provide under current conditions is 3.375. In closing there is not a single answer anyone could give you that would be 100% correct as there are various parameter that would effect the buydown. However as a rule you need to look at the savings vs. the cost and decide if it is worth doing. For every .125 you lower your rate on a stardard $200,000.00 loan will save you about $14.00 a month. In short it would cost take about 142 months to re-coop the $2000.00 you paid in the buy down. Best of luck to you and let me know if there is anything I can help you with.

May 30th 2012
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Mark Gonzales (mgonza_248_701)
#561 ranked lender in California - 6 contributions

To answer your question very simply is for a Conventional loan you will get a rate of 3.750% fixed for 30 years at a cost of .875% or $1,750 for a lock of 45 days and that is less than the point you are considering paying. For a FHA government loan you will get a rate of 3.750% fixed for 30 years at a cost of 1 point or $2,000 for a lock period of 45 days.To lower the rate under the 3.750% will not be practical in the sense that if a $200K loan payment is $926.23 Principal & Interest and if you pay 2 points to get the rate down to a 3.50% which your payment will be $898.09 Principal & Interest then the difference is $28.14 for a cost of 2 points which is $4000.00. If you use a conventional loan you already paid $1750 for your rate of 3.750% but if you chose the 3.50% rate it will cost you $2250 more and at a difference of $28.14 it will take you $2250 divided by $28.14 = 79.96 extra payments to recuperate your investment. It will be 6.67 years to recuperate that investment. You decide what to do Please call me at 909.222.3858 and ask for Mark if you have more questions.

May 30th 2012
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Bert Carpenter (BertCarpenter)
#40 ranked lender in Arizona - 1,821 contributions

In essence, buying down the rate is like making an investment. You pay a percentage of the loan amount now to lower the interest rate charged over the life of the loan. Right now, one point will get you only about a quarter percent reduction with most investors, but it really does depend on the loan type and where market conditions are at a particular moment in time. The best way to really find out the cost vs benefit, you need to work with a local Mortgage Banker/Broker rather than one of the big banks or big national mortgage factories. Unlike a bank employee, who is most likely just an order taker, a Mortgage Broker/Banker is Trained, Tested and Licensed in all aspects of Mortgage Origination. He/She will have access to loan products of many lenders, not just those of one bank, and can properly guide you. But more importantly, He/She is trained to take a look at the various different options available to you, including showing you how much each 1/8th rate reduction will cost you and how long you will need to keep the loan to "break even" in your investment. Armed with this knowledge, it is easier for you to determine the best option for your situation. Don't forget to check out your selected Mortgage Originator at the National Mortgage Licensing System at www.NMLSConsumerAccess.org ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com 888-889-9950

May 30th 2012
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