Using the simple scenario below, Colorado Loan points are explained in depth.
When securing your home loan in Colorado Springs CO, home loans will typically carry points. It is important with any Home Loan you understand points.
For this Home loan scenario, we will use a new home in Colorado Springs, Co.
Colorado Loan Points
Points
Points are initial mortgage fees paid on the loan to decrease the initial interest rate. For example, a one-point loan will always have a lower interest rate than a zero-point loan. Basically, paying points is weighing your options of paying money now versus paying money later.
0 or No Point Loans
The following outlines some of the most common reasons borrowers choose this option.
Example: You are applying for a new home loan in Colorado Springs Co.
1. Lack of finances to close escrow. Say you are applying for a loan on a new Home in Colorado Springs Co, If you are purchasing the new home and are short on cash for the down payment, a 0 Point and No Closing Cost mortgage can save you thousands of dollars.
2. If the estimated time you will be staying in the home is less than 4 years, while paying points and closing costs will give you a lower interest rate and a lower monthly payment, it typically takes about 4-5 years of living in your new Colorado Springs home to realize the benefit of the lower payment when weighed against the total cost of the points.
3. Lack of equity in the property when refinancing. A similar situation as mentioned in item “1″. If it makes financial sense to refinance your mortgage, but you do not have enough equity in the property to add your closing costs into the new mortgage – a 0 Point/No Closing Cost mortgage could make more sense.
Tax Information
In a refinance situation, points must be amortized over the entire life of the loan. For example, on a 15 year loan, you can deduct 1/15th of the points paid each year. If you refinance for a second time, you may be able to deduct the remaining unamortized points in the year you refinance the loan. Consult a tax advisor or accountant for more information.
Special Considerations
Regardless if your home loan is in Colorado Springs Co, or elsewhere, loan programs can quickly change and many new home builders will offer you lucrative loans through in-house lending programs. You should weigh all your options of the perks they are offering you first. In the long run, a free appliance or 1000.00 dollars given back to the buyer could cost you a fortune later.