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However, nothing could be further from the truth.If utilized correctly, points can be used to save you thousands of dollars through properly structuring your mortgage. So, first of all, what are points?One point is equivalent to 1% of the loan amount. So, if you are obtaining a $300,000 mortgage, one point equals $3000. Points come in two categories, origination and discount points. Although both origination and discount points are technically the same thing, origination points are typically a fee that a mortgage company charges to do your loan where as discount points are points used to discount the mortgage or lower your rate.The 5 Myths:So now that you understand the basics of what mortgage points are, here are the 5 most common myths about mortgage points.1. Points are a fee that goes to the lender. Technically, this is correct. Points do go to the broker, however, an honest broker will help you obtain a lower interest rate if you choose to pay points.2. Points must be charged on every transaction. Not true. Brokers get paid two ways- through points and/or through "yield spread premium" or a percentage paid to them directly from the lender. If the broker charges points, the yield spread premium will be zero or negative,low credit apr cards and if the broker does not charge points, he or she will make a percentage from the lender for their services. Here is an example:"No Points" Loan
Program: 30 year fixed
Loan Amount: $200,000
Rate: 6.375%
Points: 0
Cost of points: $0
Monthly payment: $1247.74"One Point" Loan
Program: 30 year fixed
Loan Amount: $200,000
Rate: 6.0%
Points: 1
Cost of points: $2000
Monthly Payment: $1199.10Points should always be your choice. In this scenario, you would save $48.64 per month in the form of a lower payment by paying an up front point cost of $2000. Carefully consider whether you will be in the home long enough to recover the cost of the points before making this decision.3. Points are tax deductible. This is partially true. When you purchase a home, points are tax deductible in their entirety in the year you purchase the home. In a refinance transaction, you must "amortize" the cost of the points over the term of the loan. In other words, if you have a 30 year loan, in the case of a refinance, you can only write off 1/30th of the cost of the points each year for 30 years.4. Points are paid up front. Many consumer mistakenly think that mortgage points must be paid out of pocket before their transaction closes. This is not true. Points are charged at closing as part of the settlement charges.5. Points can be used to buy down the rate as low as low apr credit cards you want to go. Points are used to obtain a lower interest rate, however, some clients have asked me if they can pay, for example, 5 points to lower their rate to an extremely low rate. Unfortunately, this cannot be accomplished for two reasons.First of all, predatory lending laws prohibit a broker's total fees to exceed a certain percentage of the loan amount. Second, there is always a threshold with every loan program where the lender makes it unattractive to continue to buy down the rate. In other words, perhaps you can "buy down" the rate .375% for each of the first two points. The lender will likely make it unattractive to use additional points, only allowing you to better your rate by .125% for each additional point beyond 2 points. This is because there is an ebb and flow of money in the economy, and mortgage paper at an unusually low rate is not as hot of a commodity for lenders to have in their portfolio.I hope that you now feel more comfortable with the concept of mortgage points. It is critical that you find an honest mortgage broker who is looking out for your best interests and can give you an analysis of the long term effects of different loan structures based on your unique situation. With hundreds of loan programs available in the marketplace, it is only through careful consideration of your needs and long term financial goals that the right decision can be made.
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TrCredit card balance transfer involves using a credit card to pay off the amount outstanding on one or more credit/store cards. The total debt then moves to one card.
The main benefit of balance transfer is a money-saving one. In the competitive credit card market an increasing number of companies are offering a 0% interest rate for a fixed period on balance transfers made by new customers. This allows new cardholders to make considerable savings in interest repayments. Interest free periods vary and certain credit card issuers extend the 0% interest rate offer to cover new purchases, it is worth taking great care to compare balance transfer offers well before deciding which one to choose.
Some companies offer lower than average interest rates on transferred balances for the life of the balance transfer. This may be good news for card users who are not planning to pay back credit card debt in the short term.
Transferring credit card balances is usually a simple process. Once a card application is approved it usually involves a phone call to the new card issuer to transfer the balance(s) from the other card(s). Many credit card companies also offer an on-line service, making it even easier to transfer balances via the Internet.
There is usually a ‘window’ of time after a new card is approved during which balance transfers attracting the promotional interest rate must be made.
A word of caution regarding balance transfers. Minimum monthly payments still need to be made. Fall behind with minimum payments and fines can be made and interest free offers withdrawn. The same can happen if credit limits are exceeded.
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In a market full of balance transfer deals, offers vary greatly. It is important to double-check the details carefully before signing on the dotted line. For example:
Are there any additional fees to be paid when balances are transferred? Do I need to make a minimum monthly spend using the new card to qualify for the promotional balance transfer rate? How soon after my credit card is approved do I need to make the balance transfer? What interest rate is charged on new purchases made using the card? In particular, 'Balance transfer for life' cards often put payments towards clearing the low interest balance transfer and not the recent purchases that attract higher interest Do I get charged interest on new purchases from the time the purchase is made? What does the interest rate revert to after the promotional period has finished Before taking up a balance transfer offer, also take time to consider the amount you need to move and how much you intend to pay off and purchase each month. That way you can be sure that you choose the right card for you.
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