to buy points or to put in a bigger downpayment?

michelleshack · #1 (**permalink**) 11-01-2009, 12:24 PM

hello again...
Which one is better buying points to lower interest so that you'll have a lower monthly mortgage or to put down a larger downpayment for a lower monthly mortgage?

lets say larger downpayment for 5.25% interst rate Vs buying points to bring it down to 5%???
which is which?
im confuse...

TheCaptain · #2 (**permalink**) 11-01-2009, 12:27 PM

I am not a mortgage specialist, but here is my understanding. If you plan to stay where you are for a long time, paying points can be effective (it hurts you if you end up moving or refinancing within say 10 years). Putting down a larger downpayment can be good if you have the money because you are financing less. I have never looked at it as a one or the other choice though.

sapphirecapital · #3 (**permalink**) 11-01-2009, 08:29 PM

if you want to live there for 5 years at least and if the higher down payment does not increase your equity by 10% buy the points, if you are not sure about the time you want to keep the house choose the down payment, in addition ifyou can use the mortgage interest fully for the tax deductible use the money for the down payment

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