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Offered A Buy-Down |
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Edith, We are buying a home and we will be borrowing $141,600.Our bank has offered us 6.125 percent on a 30-year conventional mortgage.Or if we agree to pay some points ($4,100) we can buy down our interest rate to 5.5 percent.This would lower our monthly payment by about $70 a month so I figure we would recoup this expense in about five years.
We plan to stay in this house for a long time (probably 20+ years).Is buying the points (paying $4,100) a good thing?It seems to me to be a no-brainer but I have not seen a definite answer anywhere. |
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No-brainer is just the right word.After you’ve been there five years, the $70 monthly savings will be all gravy.Do it by all means.
There’s no catch, no hidden problem with a buy-down.Perhaps you’ve never seen this particular matter discussed because, as is usual with financing matters, no one plan is best for everyone.To begin with, not all lenders and not all mortgage plans offer the opportunity.Then again, some borrowers are stretched to the limit when they’re buying a home and simply wouldn’t have the extra thousands available.Others may not be sure how long they’ll stay in the house, so they don’t want to gamble on getting back the extra cost.
It never makes sense to spend money just to get a tax deduction, but you may be pleased to hear that points you pay to finance the purchase of your own home are considered extra mortgage interest.They will be fully deductible on your tax return. |
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Edith
Originally published on March 6, 2006 |
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