Mortgage Points: Why Pay For Them?

 

If you are in the market for a home or considering refinancing your current mortgage, you probably have heard your mortgage professional talking about points. They may advise you to buy points or they may advise you not to, depending on your situation. The question is, do you really understand points and when it makes sense to buy points?

 

A point is 1% of the loan amount. So, one point on a $100,000 mortgage costs $1,000. Points can be purchased in increments down to an eight of a point. It's not any more complicated than that. When should you buy mortgage points?

 

The pros of doing this are really pretty easy to understand. By pre-paying your interest, you get a lower rate and therefore a lower payment for the life of your loan. The cons of buying points are that you must stay in the home for a certain period before you "break even" on the transaction.

 

For example, if you have a $200,000 mortgage and you buy two points, you will pay $4,000 for those points at closing. If buying the points lowers your payment $250 a month, you'll need to stay in your house at least 16 months to break even (16 × 250 = 4000). In this example, after 16 months you'll start making money. After several years, you'll save a lot of money.

 

One other thing to keep in mind about buying points up front: Points may be tax deductible, so there is an added benefit if you qualify for the tax deduction. Check with your tax advisor before you deduct points on your taxes.

 

If you have any questions or comments about points, just click the comment link below and sound off. We'll get back to you with answers to any questions you might have. We'd love to hear from you.

 

 

 

Reappraising Appraisers

 

While our nation's real estate downturn is still unfolding, there's been lots of talk about how to prevent a repeat in the future.

 

Part of the fix to the problem involves better regulation of appraisers. Money Editor Stacy Johnson looks at some of the changes that are in the works. Video runs 1:25…

 

 

 

Sale / Rent Back Schemes: Not Always What They Seem

 

As the slumping economy and ensuing credit crunch takes hold, and more and more people are struggling with their mortgage repayments, a number of companies are springing-up who offer a "sell / rentback" scheme. This type of proposal involves the homeowner having their house bought from them, for a percentage of its market value, then offered the chance to be a tenant, negating the need to have to vacate the premises.

 

For some, it seems like the perfect opportunity to get rid of a mortgage problem and not have to deal with the hassle of moving. However there are some critics who state that the schemes may not be all they appear to be and might actually be more trouble than they’re worth.

 

Some homeowners have reported receiving only half the market value of their house, with others stating the rental agreement was not upheld. There is also the risk that the company to whom the house is sold may not be able to maintain the mortgage repayments, and you, as former owner turned tenant, will ultimately face eviction anyway.

 

Although the general idea behind a sale and rent back is sound, the way it is handled and put in place is not, and homeowners aren’t as protected as they might think they are. As soon as they have sold their house to one of these schemes, then they have very little control over and above what is written in their contract. This forms the basis of one of the main arguments against sell and rent back companies – that the landlord can set the purchase price, rent and terms of the lease, and is very likely to be abused.

 

There are a lot of calls for this industry to be more highly regulated, in order to give customers the protection they deserve, and if complaints about various companies continue to rise, then the government and Office of Fair Trading will have to step in at some point and put down some ground-rules.

 

Do you know anyone who has sold, or may be thinking about selling, their home on one of these "Sale Rent Back" schemes? Tell us about it by clicking the comment link below. Your identity is safe, as no email addresses will ever be published here with a comment.

 

 

 

Recession-Proof Your Life

 

Unemployment is on the rise, the stock market is hitting lows and prices are increasing on everything from a gallon of milk to a gallon of gasoline. Here are a few ways you can protect yourself:

 

1. Tighten your belt

Cut down or reduce spending that isn't essential. Pay down credit card debt - which can add hundreds to your annual household budget. The average American household with at least one credit card has nearly $9,200 in credit card debt. And often that interest rate is in the mid to high-teens. Scale back any household renovation and pay down any home equity line of credit you may have.

 

2. Protect your job

The economy has shed 438,000 jobs since the beginning of the year. To make sure yours is not one of the next ones to go, make sure your boss knows your value to the organization.

Volunteer to help with any tasks left unfinished due to layoffs. Raise your profile with trade groups or professional organizations that could help you find a job in the event you lose yours. And update your skills by taking a class at a local college–consider it a career investment.

 

3. Talk to the family

Tweens and teens can easily push your household budget into the red. Enlist their help in curbing spending. Lead by example - share your savings plans and realities with them. If you are carpooling let them know it; show them your brown bag lunch. Practice what you preach.

 

4. Set aside a just-in-case fund

You always hear about the importance of setting aside an emergency fund of three to six months worth of savings - and the scenario today is the reason why - a slow economy poses extra risks and costs to the average family. Even if the high price of gas has you struggling to save, set aside some money on a regular basis.

 

The good news is that banks are desperate for deposits and paying more than they otherwise might for your money. Some banks are offering introductory rates as high as 4.65% on money market accounts.

 

Is the economy in a recession? Tell us what you think. Sound off about it using the "comment" link below. Your email address will never be publish here to protect your privacy. We'd love to hear what you think.

 

 

 

Airlines Cry for Help? Enough Already!

 

"Help us help you…" airlines pleaded with customers, asking them to urge Congress to keep down fuel prices by curbing speculation.

 

These are the same airlines that have slapped price tags on everything short of flotation devices, and now they are asking customers to channel their anger toward lawmakers who are responsible for "poorly regulated market speculation?"

 

They're charging for checked bags, they're stripping the entertainment systems out of the planes claiming they cause too much extra fuel consumption.

 

We're ALL having to pay more for fuel, but it seems to us that planes are fuller, tickets are harder and harder to get on flights we want, choices of flights are getting harder to find, and now they want US to bash lawmakers and help bail THEM out?

 

Enough already! What's next? Sound off…tell us what you think of the airlines latest ploy (or, er, plea…) Use the comment link below and tell us what you think of these latest gouge tactics by the airlines, and now they want us to help them?  Bah-humbug!