PA Mortgage Network points

TIP: Don't make any adverse changes to your financial "picture" during this time between approval and closing. Innocent mistakes range from applying for a new department store credit card, to purchasing a refrigerator for the new house, to buying a new car, to quitting a job to go full-time into a new business. When you supply us information to help verify your income, employment, assets and credit history, we will obtain a credit report directly from the credit bureau.

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For people interested in buying a home, refinancing a mortgage or applying for a home equity loan or line of credit in Pennsylvania. Great rates with superior service.

<< Frequently Asked Questions (FAQ)

Should I pay points? Does a 0 point/0 fee loan exist?

Generally speaking, if you plan to stay in your house for less than 3 years, do not pay points. If you plan to stay in your house for more than 5 years, pay 1 to 2 points. If you plan to stay in your house for 3 to 5 years, it does not make a difference whether you pay points or not.

However, the best way to decide whether you should pay points or not is to perform a break-even analysis as follows:

• Calculate your cost of points. Example: 2 points on a $100,000 loan is $2,000.

• Calculate your monthly savings on the loan by obtaining a lower interest rate. Example: $50 per month

• Divide the cost of the points by the monthly savings to come up with the number of months to break even. In this example, the number is 40 months. If you plan to keep your house for longer than the break-even number of months, then it makes sense to pay points; otherwise it does not.

The points you pay are tax-deductible, however when you get a lower payment, your tax deduction reduces. When you purchase a home, taxes will reduce your break-even time. When you refinance, points are not tax-deductible, and must be amortized over the life of the loan and results in few tax benefits or none at all.

Zero-point/zero-fee loans are attractive when rates are declining or when you plan to sell your house in less than 2 to 3 years. In most cases they are good deals, but make certain your lender pays for your closing costs from rebate points and not by increasing your loan amount. You may have to come up with some money at closing for recurring costs (taxes, insurance, and interest), but you would have to pay for these whether you refinanced or not.

The main benefit of zero-point/zero-fee loans is that you have no out-of-pocket costs. And, if the rates drop in the future, you could refinance again even for a small drop in rates. The main disadvantage is that you are paying a higher rate than you would be paying if you had paid points and closing costs.