Points can be confusing for anyone who isn’t a mortgage or lending expert. This is why most people overlook the option of paying points on their Ohio refinance loan. The problem is, they also miss out on the opportunity to save money over the life of their loan. The information below can help you determine whether or not you should pay points on your refinance.
What are Points?
There are two different types of points that can be paid with an Ohio refinance loan: origination points and discount points. Origination points are required to pay for part of the closing costs and are paid to the originating lender. Discount points are optional points that can be paid to lower your interest rate. One point is equal to one percent of the loan. Paying these points does not change the amount you borrow, but it does buy down the rate used to calculate your monthly mortgage payments.
Reasons to Pay Points
If you have the money to pay discount points, there is no good reason not to do it. Interest rates on 30-year Ohio home refinance loans currently average 5.77 percent. For each point you pay, you lower your interest rate by approximately a quarter of an interest point. If you would be paying 5.77 percent, paying 2 discount points can lower your interest rate to 5.27 percent. This will in turn lower your monthly payments, as well as the total cost of the loan.
Reasons Not to Pay Points
If you don’t plan on keeping your home for much longer, paying points on your Ohio refinance loan can be a serious waste of money. Points come with an initial upfront cost. You will need to stay in the home for a certain amount of time for the interest savings to be worthwhile.
By: Jane A. Hale
Posts Tagged ‘Opportunity’
Ohio Refinance Loans – Should You Pay Points on Your Refinance?
March 26th, 2010Need To Know What Is Refinance Loans
February 3rd, 2010
Refinancing is usually done to capitalize on lower interest rates. Lower interest rates translate into lower mortgage loan rates and by refinancing at the time when prevailing interest rates are lower, you can substantially lower your monthly payments.
Refinancing loans offer an excellent opportunity to pay off existing debts and reduce periodic payment obligations. You may even liquidate equity that has accumulated in real property over the period of tenure by refinancing. Extending the tenure of a refinancing loan is another effective way of lowering monthly payments. This is a widely accepted tactic of saving, and using the saved amount to pay off the principal of the loan. Therefore, extending a loan works as a two-way process, it lowers your monthly payment and reduces the payment burden since you use the amount saved to payback the principal amount.
Cash refinancing is another important technique to save. Using cash refinancing, you can capitalize on the equity that has been accumulated in your house over the years, and use the ready cash to utilize on projects that are more important. You can even lessen out your risks by opting for refinance loans. However, this is applicable only in case of adjustable-rate mortgages (ARMs)…in markets characterized by fluctuating interest rates. You can even refinance to convert an existing ARM into fixed rate.
People across America are increasingly using a refinancing loan to pay off high-interest debts such as credit card debts, with lower-interest debts such as that of a fixed-rate home mortgage and other debts down the line. You can also save substantially on taxes by refinancing. Interestingly, non-tax deductible debts such as credit card debts can be easily transformed into tax-deductible debts such as home mortgage debts. This substantially lowers tax liability, and helps in putting the owner into a lower tax bracket.
By: Anirban Bhattacharya
Auto Refinance Loans – What You Need to Know
November 16th, 2009
Many people have begun taking advantage of refinancing their auto loans, but the question those who don’t participate often ask is “Why?” There are many reason people find benefit in participating in this process, and after you read this article, you may understand why. So to introduce to auto refinance loans, we will look at why people do it, as well as the perks.
What are Auto Refinance Loans?
Auto refinance loans are loans taken out by a person who already has an auto loan; however they are interested in refinancing their loan for new interest rates. When you take out one of these loans, you allow the financial institution to pay off your current loan then begin paying the new financial institution for the money that you owe.
Why do People Refinance their Cars?
There are several reasons that people choose to take on auto refinance loans. One is that they took an offer from a dealership that they were not particularly happy with, however, the dealer offered so many rebates and rewards that they could not turn down the deal. Now that time has passed, they want to get out of working with the dealership and choose to refinance to remove them from the equation.
Another reason people choose to refinance is because their credit has improved. If you bought your car when your credit was subprime, you may have been subjected to high interest rates. However, over a couple of years, you were able to pay a few things off and, in turn, raised your credit score. As a result, you are eligible for higher interest rates. It is only natural to want to take advantage of this opportunity, so many refinance to begin paying a lower car note.
Some people take advantage of refinancing because they are interested in buying a car that they are currently leasing. Many dealerships are not interested in working out a way to help you buy the car because they make more money by leasing it. However, if you come to them with cash, they will release the car. So many people take out loans for the amount owed on the car, which enables them to purchase it. Then they simply pay back the loan to the financial institution from which they borrowed.
While There Are Perks, Be Careful
The perks of refinancing your car are many (most of which are listed above). It gives you a great opportunity to get out of a situation you were not happy with – and that is never a bad thing. Also, it gives you a chance to help improve your credit by potentially providing you with a lower car payment that will ensure you don’t miss a month – showing you were in good standing for the term of the loan is a great thing!
It is important, however, that when taking out auto refinance loans that you don’t leave a bad situation for one that is worse. In other words, don’t assume the interest rates and terms of the new loan will ensure a better outcome for you. Make sure that you read all terms and conditions of any loans you consider because any establishment has the ability to take advantage of you. As long as you do your homework and proceed with caution, you are likely to have great success with auto refinance loans.
By: Jeffrey Meier