Purchasing a property takes a lot of steps than you might expect. However, it is important to check all the steps needed before jumping into the buying one just to make sure you won’t make a regretful decision. Furthermore, some steps could really cut the expense needed for the closing cost. These two points are the final steps you need in your list that could really save you some bucks for the closing cost!
“Discount” points surprisingly don’t always cut the cost
At times, you may receive a “discount”, or mortgage offer from your lender. It comes in the form of points, and you need to pay for them to the mortgage lender. In exchange for these points, you may get a lower interest rate. According to Investor Junkie, one point usually equals 1% of the total amount being borrowed. The cost is accumulated to the closing cost. Hence, it does not always mean your interest rate will be cut by 1%. Instead, it may drop around 0.25% lower.
A discount sounds nice, why shouldn’t we get them? There are some considerations to take before you make the decision. First, know your interest-rate first. If you already chose a low interest-rate environment, why bother paying more to push it lower? Keep your head cool and don’t go crazy over the word “discount”. Try to take a moment to calculate whether the “discount” really helps you save more.
Another point to consider is how long you plan to reside in your new home. A quick tip from Investor Junkie is that each point represents an extended time for you to stay in order to break even on the upfront cost.
Accumulate your closing cost into your loan amount
Ask your lender if it’s possible to roll your closing costs into your loan balance. In several occurrences, some lender might change the overall closing cost into a higher interest for your loan. This deal could be helpful if you are low on cash upon making the deal. However, keep in mind that this means a larger mortgage payment for the entire duration of your loan.
At the end of the day, always remember to stay calm before making any decision. Not every offer can benefit you. Always think and calculate everything before agreeing on the terms and conditions.
Read also: Property Owning: Suppressing Closing Cost (Part 2)
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