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Paying points using a VA Home Loan

Here is the scenario:

Is it worth paying points on a VA Home loan upfront to get a lower rate...
or
Is it worth paying an extra X amount of dollars every month (from what the savings would have been trying to get a lower rate from paying points upfront)

It seems like the same thing by paying more every month, since there are no prepayment penalties and the extra every month goes directly to the principal, it seems that paying more every month is the same as paying with points, but you do not need that upfront money to get a lower rate at the close of escrow.

Does this make sense? Can someone clarify this for me? Thank you all for your help and professionalism.
  • July 14 2009 - US
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Answers (2)

Depends mostly on how long you intend to own the home.By not paying points, you typically pay a higher interest rate, so you would be paying more to interest each month, not more to principal.

If you intend to own it for a long period of time, pay the point get the lower interest rate.

If you intend to sell or refinance (if you could) in the next few years, take the slightly higher rate and keep your closing costs down.

Ask your lender to do the math and find your break even time frame for recouping the point you would pay to make this picture clear.
  • July 14 2009
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You need to have your loan officer calculate, or you can do it yourself, the difference between payments with pts vs no or low pts. 

I would think your lender could help you, or you could contact someone here on the board for your state.

Best of Luck

We appreciate your military service..Truth...not a plug for business.
  • July 14 2009
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