Kris Anderson

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Rainmaker
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Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
& Host of Postcards From Success Podcast

Length of ownership and break even point - how long does it takes to break even on the expense of the points vs. the value of owning "that" home.

The more desire for the home and the longer the stay, the more they are worth. Most 3-5 year buyers will not see the value in paying points as much as 5-20 year buyers.

I also consult with my lender on this, so please see Jason E. Gordon's answer below... 

Sep 28, 2022 06:53 AM
Rainmaker
1,004,827
Peter Mohylsky
PMI. Destin - Miramar Beach, FL

Crunch th enumbers.  learn how.  it is easy using a excel spread sheet.  Your lender of choice might/should be able to help you.

Sep 28, 2022 07:34 AM
Rainmaker
854,942
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

Crunch some numbers; they usually ARE NOT. Your lender should help you.

Sep 28, 2022 06:22 AM
Rainmaker
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Bob "RealMan" Timm
Ward County Notary Services - Minot, ND
Owner of Ward Co Notary Services retired RE Broker

I don't Kris Anderson , I leave that up to the Borrower and their lender.

Sep 28, 2022 08:16 AM
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Brian England
Arizona Focus Realty - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

Everybody's situation is likely a bit different, I count on trusted lenders to advise my clients properly on whether or not the points would be worth it for their situation.

Sep 28, 2022 07:47 AM
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Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

That is a discussion to be had with their lender who can explain how long it will take to break even. It may also be beneficial for the buyer to have a discussion with their tax professional. 

Sep 28, 2022 07:31 AM
Rainmaker
1,775,857
Lyn Sims
Schaumburg, IL
Real Estate Agent Retired

How long buyers recoup their money from the buydown. Seems to work better with buyers that want to make their home a forever/long term home.

Sep 28, 2022 06:17 AM
Rainmaker
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John Juarez
The Medford Real Estate Team - Fremont, CA
ePRO, SRES, GRI, PMN

I recommend consultation with a lender to provide the information to help the borrower select the best path.

Sep 28, 2022 12:34 PM
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Bob Crane
Woodland Management Service / Woodland Real Estate, KW Diversified - Stevens Point, WI
Forestland Experts! 715-204-9671

I dont, however those who do probably have a spreadsheet to determine which way is best.

Sep 28, 2022 11:56 AM
Rainmaker
7,130,570
Roy Kelley
Retired - Gaithersburg, MD

It depends upon the benefits received by paying the points. Compare with alternatives. 

Sep 28, 2022 11:17 AM
Rainmaker
4,409,178
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Will have to park on this one and see what others say and what I can learn

 

Sep 28, 2022 11:05 AM
Rainmaker
586,728
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

Best recommendation would be to consult with your Lender ...

Sep 28, 2022 10:26 AM
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708,398
Tony Lewis
Summit Real Estate Group - Valencia, CA
Summit Real Estate Group Valencia & Aliso Viejo

Paying Points brings to mind two factors'; 1- The Cost 2- How long does the borrower plan on living in the house.  My wife and I have lived in our homes for an average of fifteen years so the lowest interest rate makes sense to us. Most people live in their homes for closer to three years so paying points doesn't makes much sense in most circumstances.

Sep 28, 2022 09:55 AM
Rainer
359,378
Caroline Gerardo
Licensed in 20 states - Newport Beach, CA
C. G. Barbeau the Loan Lady nmls 324982

Capital markets for lenders (the Wizard of Oz at a desk who prices loans based on the ten year, what MBS is buying, and how many puzzle pieces can fit to replace deals in a tranche) generally price points to break even in more than 60 months. There is NO BARGAIN paying points. The upfront cost is huge and then sunk if rates come down and they refinance. Send me the numbers I can send you graphs, calculations and a visual way of deciding that paying one percent of a loan probably doesn't make sense. Payment difference for an eighth or sixteenth will be nominal. 

Sep 28, 2022 08:52 AM
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Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

It's all about the numbers! See what Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets said.

Sep 28, 2022 08:09 PM
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John Meussner
Mortgages in AZ, CA, CO, DE, FL, GA, MD, MN, MT, NC, NJ, NV, OK, OR, PA, SC, SD, TN, TX, UT, VA, WI - Fair Oaks, CA
#MortgageMadeEasy Fair Oaks, CA 484-680-4852

At a basic level, if the cost is worth the savings.  Typically, a 1% charge results in a .25 reduction to interest rate - if, for example, on a given day, you can get a .125 reduction in rate with a charge of .125 points, it's almost always worth it to pay.

Time in the house doesn't matter in the considering - TIME WITH THE LOAN DOES.  Rates have ebbed and flowed, trending downward, since the 80s - - most people have their mortgage less than 5 years.  If you paid points today and stayed in the house 20 years, that would be a bad gauge on whether or not it's worth it, because if rates drop in 6 months and you refinance, the points would be a waste.

How long you'll hold the loan, the total cost, and the total savings are the considerations someone needs to make.

Sep 28, 2022 03:35 PM
Rainmaker
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Gary Frimann, CRS, GRI, SRES
Eagle Ridge Realty / Signature Homes & Estates - Gilroy, CA
REALTOR and Broker

Length of intent to own and how long to recover initial cost.  Add to that, tax deductibility (purchase vs. refi).  

Sep 28, 2022 03:00 PM
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Don Baker
Lane Realty - Eatonton, GA
Lake Sinclair Specialist

Depends on how long you will be there.  My next house will likely be my last house so could be very important.

Sep 28, 2022 02:20 PM
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Alan May
Jameson Sotheby's International Realty - Evanston, IL
A moving experience!

I don't.  I leave that sort of thing up to my trusted lenders.

Sep 28, 2022 01:28 PM
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589,908
Jason E. Gordon
AmeriFirst Financial Inc, San Diego, CA - San Diego, CA
Sr Loan Officer, CMA, CMPS, CDLP, CDRE, RCSD, CDPE

Simple break-even analysis.  Let's say for example you are weighing 2 options on a $400K loan amount:

1) 5.000% with 0 points (P+I payment = $2147.29)

2) 4.750 with 1 point (P+I payment = $2086.59)

Cost difference = $4000 

Payment difference = $60.70

$4000 extra cost to save $60.70 per month = 65.90 months (5.49 years) to break-even. 

NOTE: there are other ways to calculate whether points are a good idea...this is just a sample.

Sep 28, 2022 09:44 AM
Rainmaker
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Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

I recommend to my buyers to call two or three lenders, and get the scoop in order to make good decisions.

Sep 28, 2022 08:48 AM
Rainmaker
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Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

The long term property owner may benefit, but those staying 7 years or less likely not. Sometimes a buy down can benefit a buyer to qualify because of ratios. A decision made individually based on circumstances.

Sep 29, 2022 04:21 AM
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Carla Freund
Keller Williams Preferred Realty - Raleigh, NC
Carolina Life RealEstate & Relocation 919-602-8489

I let my lender look at the clients personal information and intentions and help them decide. It really all depends on how long they're going to own the house and keep the mortgage.

Sep 29, 2022 04:20 AM
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Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

There are only two ways Kris Anderson ...1. math and its results don't lie and 2. the persons emotions as in I want this and that is that! 

Sep 28, 2022 08:50 AM
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J.R. Schloemer, CRS
Kentucky Select Properties - Louisville, KY

I’m not typically a fan of pre-paying things. Depends on each individual situation and what their plans are. Banks already get enough of people’s money, so I’m not an advocate to give them more money.

Sep 29, 2022 07:07 PM
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Wanda Kubat-Nerdin - Wanda Can!
Red Rock Real Estate Brokered by Real - St. George, UT
St. George Utah Area Residential Sales Agent

It is a case-by-case basis. It worked well for me back in 1998 because I've been in my home for over 20 years.

Sep 29, 2022 08:02 AM