Bad Credit Mortgages
Should You Pay Points on Your Mortgage Refinance After Bankruptcy?
Looking to save money on your Ohio mortgage refinance after bankruptcy? You may want to consider paying points on the refinance loan. Paying discount points at closing can significantly reduce your rate and get you a post-bankruptcy Ohio mortgage refinance that you can afford.
What is a Point?
A discount point is equal to one percent of your loan amount. If you pay discount points when you close on your Ohio mortgage refinance after bankruptcy, you can reduce the interest rate that you are being charged on the loan.
Though the amount of the reduction can vary from lender to lender, your rate is typically reduced by a quarter of a percentage for every point paid. For example, paying two discount mortgage points could change your interest rate from 8.25 percent to 7.75 percent. While this doesn’t seem like a lot, it could actually save you a great deal of money over the life of your loan.
When Should You Pay Points?
When refinancing an Ohio mortgage after bankruptcy, you are bound to pay a higher rate than the average of 5.64 percent. One way to ensure that you get the best rate possible is to pay points. If you have the money to cover the upfront costs, you should take advantage of the opportunity.
When Should You Not Pay Points?
There is no doubt about it, paying points will lower your interest rate, but there are times to avoid paying points. For example, if paying points on your Ohio mortgage refinance will leave you strapped for cash afterwards, it may be better for you to take the higher rate. You may also want to avoid paying points if you plan on selling the home or refinancing again within the next five years. It usually takes at least this long for the benefits of paying points to kick in.
