6 Reasons Aberdeen, NJ Realtors Say to Not Pay Points on Your Mortgage

Why Realtors in Aberdeen, NJ advise against paying mortgage points

Virtually every time you apply for a mortgage loan, you will be offered a type of loan in which you have an option to pay points as well as an option to not pay those points, and one point equals 1% of the total loan amount. The advantages to paying points are many according to Realtors in Aberdeen, NJ, including interest rate reductions, paying down the loan faster, and qualifying for a bigger loan. While there are many reasons in which a borrower may decide to pay points on their loan, there are also a number of reasons why he or she would not want to choose this option.

Below you will find reasons not to pay points on your mortgage loan according to Realtors in Aberdeen NJ:

You Need The Money For Reserves advise Realtors in Aberdeen NJ

Everyone should have an emergency cash fund at their disposal according to Realtors in Aberdeen, NJ. If you find that you have to go into your personal reserves in order to pay for points on a loan, you should consider a loan with no points. Also, keep in mind that a requirement of lenders is that borrowers have a minimal amount of reserves on hand to ensure that the mortgage payment will be made. This amount varies from broker to broker, so it is best to check with your lender as to what this amount might be.

If The Money Would Be Better Spent For Other Things 

If you have higher interest rate loans or credit cards, and the money that you would apply towards paying points would be better spent paying off other debts, then Realtors in Aberdeen, NJ suggest you choose a loan with zero points. You can reduce your other debts at this time and likely refinance into a new loan for your home later down the road, where you may refinance into a loan with a lower interest rate, by paying points at that time.

You Will Refinance or Sell Your Home In the Next Few Years 

If you are sure that you will sell your home within 2 to 4 years of purchasing it, paying points may not be in your best interest. An example of this is if you have purchased your first home and only plan on being there for a short amount of time, paying points will not likely be advantageous for you. The reason for this is that when you are paying points to reduce your interest rate, it will generally take between 2 to 4 years to recoup the upfront cost. 

You Feel Certain That Interest Rates Will Be Reduced

Aberdeen, NJ Realtors say if you feel confident that interest rates will be decreasing, you may consider choosing a loan with no points. Due to the fact it will take you a few years to recover the cost of paying for points, you might lose out if rates decrease and you decide to refinance.

You Need The Money For A Down Payment Advise Realtors in Aberdeen NJ

There is no getting around the fact that most lenders require bigger down payments with FHA and VA loans being the exception. When the time comes for you to buy a home, Realtors in Aberdeen, NJ say to be prepared to have a substantial down payment amount, such as 20%. If you are having difficulty coming up with the down payment, a loan with no points is probably a good option for you.

If You Cannot Finance the Cost of Points

Plain and simple, if you cannot afford to have the cost of points financed into your mortgage, nor afford to pay them upfront, stay away from loans with points.

 

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