In the midst of the holiday season, we continue to provide the real estate service you have come to expect! This week, we received a question on the wisdom of paying discount points during a refinance or purchase. Great question! Just in case you’re a little uncertain what discount points are, here’s a quick definition.  Each point is 1% of your mortgage amount and is essentially prepaid interest.  These points (or portions thereof) are used to reduce your mortgage note rate. There is no real rule of thumb as to when it’s best to pay or walk away. It really depends on multiple factors such as available cash, the amount of time it takes to recoup the investment, other needed uses for your money and general investment philosophy. Even as I tell you there is no “rule” per se about points, many of my mortgage clients seemed to consider paying the points if the payback would be in the range of 30-36 months or less. It’s up to you to decide what best promotes your specific situation.

For additional information, you might want to take a look at the following links. There is an abundance of information available but these two sites will give you a quick overview regarding paying points and potential benefits. Here you go; www.bankrate.com/brm/news/mortgages/20060126a1.asp and www.mortgagecalculatorsplus.com  and pass on to all.

Have an AWESOME week!