“Seller-paid points” are where the seller pays points to reduce the interest rate on your mortgage. One point = 1% of the loan amount paid up front to your mortgage lender at the closing. This buys you a lower interest rate on your mortgage and a lower monthly payment. Here are three ways you can benefit from this strategy as a buyer:
Paying points to reduce your rate can have 2-3 times the impact on your purchasing power vs. reducing the purchase price by that same amount. For example:
Your total savings over the life of the loan is likely to be significantly more with seller-paid points vs. a reduction in the purchase price. In fact, it could end up being 2-3 times the impact, depending on the specifics of your situation.
Your interest rate, your APR, and your monthly payment would all be lower with seller-paid points vs. a reduction in the purchase price. This means that your debt ratio would also be lower and it would likely be easier for you to qualify for financing. Let me know if you’d like for me to run some numbers and see if seller-paid points might make sense in your situation!
The best way to gain a competitive advantage in today’s changing market is to work with the right mortgage professional who can help you think through your options. Contact me so we can get started!
This article is intended to be accurate, but the information is not guaranteed and situations vary from person to person. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional.
The article is provided with content from Momentifi.