Discount Points And Buydowns

MRR and PLR Articles Pack

Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.

AI Generated Image

Discount Points and Buydowns


Summary

By investing extra money at closing, you can lower your loan's interest rate through discount points or buydowns. These options can adjust your interest rate either temporarily or permanently.

Temporary Buydowns

Temporary buydowns involve pre-paying interest to lower the loan's rate for the first few years, usually 2 or 3. A popular example is the 3-2-1 buydown, where the rate drops by 3% the first year, 2% the second, and 1% the third. This approach can help you qualify for a bigger loan initially and may be beneficial if you anticipate an increase in your income, making future higher payments manageable.

Permanent Buydowns

With permanent buydowns, you pay discount points to reduce the interest rate for the entire duration of the loan. One discount point equals 1% of the loan amount. For instance, on a $100,000 loan, one discount point costs $1,000. Typically, around 4 to 6 points are needed to lower the rate by a full percentage point. This strategy can lead to significant savings, depending on how long it takes to recover the cost of the points.

Example

Consider a $100,000, 30-year mortgage at 7.5% with no discount points, resulting in a monthly payment of $699.21. If you purchase 2 discount points, reducing the rate to 7.0%, the cost of the points is $2,000, and the monthly payment drops to $665.30. This saves $33.91 per month. Dividing the point cost by the savings reveals a break-even point of 59 months. If you plan to keep the property for 5 years or more, this is a worthwhile option.

Discount points and buydowns can effectively reduce costs, but it's crucial to analyze whether they financially benefit you.



You can find the original non-AI version of this article here: Discount Points And Buydowns.

You can browse and read all the articles for free. If you want to use them and get PLR and MRR rights, you need to buy the pack. Learn more about this pack of over 100 000 MRR and PLR articles.

“MRR and PLR Article Pack Is Ready For You To Have Your Very Own Article Selling Business. All articles in this pack come with MRR (Master Resale Rights) and PLR (Private Label Rights). Learn more about this pack of over 100 000 MRR and PLR articles.”