Omaha prides itself on being one of the cleanest and most pristine cities in North America and visitors have fallen in love with the southern-style charm and laid back appeal of the city. With the constant influx on population, Omaha will be ready to call itself a metropolis in a matter of a few short years. That translates to a booming housing market ripe for those looking to move into this up and coming city and for those looking to refinance their home or get an excellent home equity loan.
This helpful guide to refinance, mortgage, and home equity loans in Omaha , NE hopes to guide you through the refinance or mortgage process. We know how confusing and crazy the process can seem, especially the first time, so we are going to take a look at one aspect of dealing with banks that everyone should understand.
The interest rate on your mortgage is one of the most important factors in deciding which mortgage or refinance offer to choose. However, consumers need to remember the interest rate is only one part of the process. There are a few different things that impact your mortgage, and you should take a quick look at them all before you decide which lender to go with.
There are even some hidden tricks of the trade you can use to lower your interest rate even further. During closing, some banks offer you the chance to “buy points” to lower your interest rate.
What is a point? A point is a fee the bank or the lender you use charges you for processing your loan. A point is equal to one percent of your mortgage. So, if you are getting a $200,000 mortgage, one point would be $2,000. Now, it must seem obvious that you would want the least amount of points possible, right? Under most circumstances, you are absolutely correct, but there is one situation where you actually want more points.
Some banks will offer you the chance to lower your interest rate by a certain percentage, usually between 1/6 th of a percent to 1/8 th of a percent by paying points up front. Now, this is going to take some math, but try to follow the equation.
Let’s say your mortgage is for $200,000 and you contributed a down payment of the recommended 20 percent. That means you now owe the bank $180,000, so each point would be worth $1,800. Let’s say your interest rate is 6 percent on a 30-year fixed mortgage. That puts your monthly payments at $1,079 per month. That is a total cost over the life of your mortgage of $388,440.
But let’s say you buy two points at a cost of $3,600. The bank agrees to lower your interest rate from 6 percent to 5.66 percent. It does not sound like much, does it? However, let’s see the savings over the long term. Your monthly payment would decrease to $1,040 per month, a savings of $39 a month. When you stretch that out over the life of your mortgage, you end up paying $374,400, a savings of over $14,000! Of course, not everyone can afford to buy points up front, and some people choose to put any extra cash they have towards a larger down payment. And, of course, sometimes banks and lenders simply refuse borrowers to buy points, but thanks to the fact that you can shop around for a mortgage, the chances are good for you to find a lender that will let you buy points.
If you are interested in learning more about a great refinance, mortgage, and home equity loan offer click here and one of our experts will contact you.
