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Refinancing - Paying 1/2 pt vs. 1 pt vs 2 points.

I'm currently looking at refinancing and paying 1 point.  If I up it to say 2 point, what would that lower my interest rate by?  Is it typically .50% for every point?  .375%? for every point?  .25% for every point?  Anyone know what is common/typical?
  • October 28 2009 - Phoenix
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Answers (15)

I still like your answer the best..usually do!

  • November 09 2010
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You're right. My bad, but I'm blaming Randal. He started it in the first place. :P
  • November 09 2010
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Great re-answers to a thread that was started in October of 2009!
  • November 09 2010
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Profile picture for sunnyview
You could try running a points calculator here to see what the number look like. I don't think it makes sense for most people to buy additional points since they rarely seem to stay in the house long enough to justify the upfront cost.
  • November 09 2010
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I wouldn't  buy down the rate it generally never adds up to being the smartest option. If you are paying 1 point for a rate at 4.25% then you have a good deal if it is worst talk to another lender.
  • November 08 2010
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I agree with nearly all the contributors.  All lenders are different once you go beyond a 1 point cost, so you will need to compare various rate/fee combinations from a few trusted lenders.  Then see how much each rate/fee combination will save you in interest paid at different time frames. 

Typically with most lenders the interest rate differential between a zero point and a 1 point loan is the same - .25% .  Time-frame for how long you intend to keep the home or loan should dictate what fees to pay.  For example, using the .25% rate differential as the standard, If you intend to keep the home or loan for less than 5 years, then minimize your costs and go with a zero point loan.  
  • November 06 2010
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Every lender is different in this regard. Make sure to ask this specific question to your lender and compare with others. 
  • November 02 2010
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Over the past year, 1 point has typically lowered your rate about .25% for a fixed conventional or government loan.  Your best way to make this decision is to have a lender who will show you how much each option can cost or save you during the time you expect to be in your home.  Make YOUR choice based on how if affects YOUR money.  I hope this helps.   
  • November 02 2010
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Every lender is different. If it were me I would just go with the par rate.

Best wishes, Rudi
  • November 02 2010
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The mortgage rates have a lower spread on the fixed programs with points than on adjustable programs. For example on a 30yrs fixed you can save 0.25% in rate with 1% point. On an adjustable the difference in rates could be as much as 0.625% in rate with the same 1% point.

Again it depends how long you want to keep the property and what is the Breakeven of the cost of getting the mortgage. The rates are historical low, I would suggest to get together with a mortgage consultant who can run the numbers based on breakeven of paying points taking into consideration the tax benefits as well

  • November 01 2010
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Find an experienced mortgage banker, spend sometime with them and run numbers for each scenario. There is not always a right or wrong answer to paying points. If your goal is the lowest monthly payment possible, points may make sense. If you plan to sell in a few years, points may not make sense. Each borrowers financial situation and comfort level are different. 

It is NOT typically .50% for every point. In fact, mortgage rate spreads have nothing typical about them. Consult with your loan officer and understand your options.
  • November 01 2010
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If you wanted to really lower your payment make one of those 2 points a discount point.  Just a different way of looking at things and Discount points are still a tax deduction.  Many say rates could go down after Wednesday.  You still need to ask yourselves how long will you stay in that property.  If it is more then 5 years it may pay you to buydown your rate.  If less then 5 years probably not.
  • November 01 2010
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The gap or cost between interest rates will vary just like the interest rate itself.  For fixed rates, on average, 0.5 point will buy you 0.125%.  Whereas, 1 point will buy you 0.25%.  Generally speaking.  This can also vary between lenders.  Lots of variables on the quoting side.   

For example, if I quote you 5.0% with no points, I can probably offer you 4.75% with 1 point.  However, you cannot infer 4.5% would simply cost 2 points.  Rates start to get exponentially expensive at some point. 

  • October 30 2009
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unfortunately there is no set scale, contact your originator and ask them what the difference in rate would be, then ask them to calculate how many years it will take to reach your break even point. 
  • October 28 2009
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It can be as low as .125 and typically will be a maximum of .375. improvemen to rate.Depends on way too many variables to decribe, so best to ask your loan originator that question.
  • October 28 2009
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