September 2020 Mortgage Market Update
Is Paying Points Right for You?
One of the ways you can lower your interest rate and monthly mortgage payment even more is by paying points, or buying down the interest rate. When deciding whether or not paying points is right for you, it is important to run the numbers to determine the break-even point. You need to consider the amount of time it will take to recoup the cost of paying points.
The first question we always ask is how long you intend to stay in your house? Buying points may make sense if you plan on owning the home after you’ve reached the break-even period. If you’re purchasing a home, paying points can save you significant money over the course of your loan, but it’s important to understand how long it takes for the additional upfront cost to be worthwhile.
For example, when you buy a rate down with the intention of recouping that money in 7 to 8 years, if something changes and you and your family decide to sell your house in 5 years, you’re actually losing money. Or, if rates go down even further, and you decide to refinance your home again in a year or two, you’ve lost money again. You really want to take into consideration what the future looks like for you. Of course, no one knows what the rates are going to do, but in most cases, buying points does not always make sense.
That is also true for paying your mortgage insurance premiums upfront. When you purchase a home and you put less than 20% down, you will have to pay mortgage insurance either upfront or monthly. Paying the insurance premium upfront will bring the monthly payment down and save you money over the life of the loan, but if you choose to sell or refinance before your break-even point, you might end up losing money.
Most of our customers are not paying points on their loans we are closing right now and they are still seeing amazing rates. However, paying points is still a great option you can discuss with your lender.
A Look at the September 2020 Housing Market
We are still looking at incredibly low inventory with less than 400 active listings in Shasta County. This housing shortage crisis is a nationwide trend right now. We have many people wanting to move away from cities to more rural and suburban areas like Redding. This is putting pressure on housing prices, and we see homes selling above asking prices. When you couple this trend with all time low interest rates, this leads to a recipe for a super hot market. We can never be sure how long this will last, some say it will end after the election, some say it could definitely run into next year. What we do know is there are still good deals out there, you just want to make sure you are aligned with a real estate agent that’s going to help you find them.
If you haven’t looked into refinancing, contact our office to get prequalified and to see if we can help lower your monthly mortgage payment. Interest rates are still at an all time low and statistics show that half of Americans are eligible for a refinance.
Thanks again for your continued support and referrals. Thanks to you, we have not had to lay anyone off and remain as busy as ever during this pandemic. Thank you again. Please call at any time, and have a great September.Questions? Contact Chris Today!