As interest rates have started to increase, Atlanta homebuyers are becoming even more concerned with how to lower their rates. There are many different options available to lower your interest rates, such as opting for an adjustable rate mortgage. But, for homebuyers that prefer to stay with a traditional fixed-rate mortgage, they have the option to lower the interest rate by paying for discount points.
Discount points allow you to pay additional costs at closing to buy down your interest rate in order to lower your monthly payment amounts. However, one of the negatives of buying points is that it can be quite expensive up front. For example, to buy your interest rate down by a quarter of a percentage point, it would cost you one point, which is about one percent of your loan amount. So, how do you determine if it makes financial sense for you to purchase points and buy down your interest rates, or stick with the higher rate?
At Academy, we would advise anyone considering buying points to do a break-even analysis of your loan, and our loan officers are always available to do this with you. A break-even analysis will break down how much additional money you would be paying for discount points at closing time versus how much you could lower your monthly payment. By comparing those amounts, you can determine which option makes financial sense for you. Seven years is generally the break-even point, so if you plan on being in your new home for at least seven years, it is a good idea to consider buying discount points. Over time, the lowered monthly payment can wind up saving you more money than what it cost you to pay up front at closing to lower the rate.
Another benefit for opting to purchase discount points is that most financial analysts and tax preparers say that discount points are tax deductible. Homebuyers that are eligible for a mortgage tax deduction can write off the purchase of their discount points because it is viewed as if you are paying mortgage interest in advance.
For more information on purchasing discount points for your new Atlanta home loan, contact a loan officer with Academy Mortgage at 404-558-4399 or visit us online at www.AcademyMortgage.com.
Equal Housing Lender. (c)2013 Academy Mortgage License #3113. GA Lic. # 20505. This is not a commitment to lend. Academy Mortgage Atlanta: 5565 Glenridge Connector, Suite 400. Atlanta, GA 30342. Georgia Residential Mortgage Licensee.