What is a "Mortgage Rate Buydown"? [mortgagecalculator-tips.blogspot.com]
I want to talk about something today, called an "NJ mortgage rate buydown." You may be familiar with mortgage rate buydowns, or you may never have heard of them before. Basically, it is a way to further reduce an interest rate that your NJ mortgage loan officer has quoted you, by paying an extra fee. That's it, there ain't no more! Of course, I can't just end the article right there, so I'll give you some more detail about how this actually works. Let's say that your New Jersey mortgage company has quoted you an interest rate of 6%. For whatever reason, you think you can get a lower rate than that, even though 6% is still very good. You can tell your mortgage guy or gal, that you would like to pay a point on the loan, as a method of "buying down" that interest rate to, say, 5%
By doing this, your total NJ mortgage closing costs will definitely be higher, but you avoid paying that 6% interest rate! You see, if 6% was the lowest that this company offered, paying that one point on the loan could enable them, financially, to give you that 5% rate you really wanted, which will save you likely over $ 100,000 over the life of your mortgage term.
So basically, you are trading your "cash money", by paying a point on the loan, over a higher monthly payment. Some people choose to do it one way, others do it another way, it's really just a matter of whatever you prefer. Think of it like a subsidy. It's like socking away twelve hundred in the bank and withdrawing $ 100 every month for twelve months to help make your NJ mortgage payment.You are trading one thing for another, because that was what was important to you at the time... just getting the lowest possible rate.
Another thing, aside from a mortgage buydown, is the length of your mortgage term.
That in itself, is a way to "buy down" the monthly payment. Simply put, if you elect to get a shorter mortgage term in New Jersey, you generally get a lower rate as well. The reason for this is because it is seen as lower risk to the lender, even though your monthly payments will be higher. So now, I hope you have a better understanding of what a mortgage buydown is, and how you can use it to your own benefit . More What is a "Mortgage Rate Buydown"? ArticlesQuestion by : How can I shop for best mortgage rate without paying the application fee each time? I've looked at different mortgage rates on the internet and newspaper. But these rates are generally just a range and not specific to a credit score. My credit score is OK, and I expect my rate would probably would fall somewhere between the high and low rate usually listed. I tried to see what my rate would be at my bank, but they were charging an application fee of 100 dollars. Will that be the case each time? I'd like to "shop" around before I actually have to pay any fee. Thanks! Best answer for How can I shop for best mortgage rate without paying the application fee each time?:
Answer by William
You can "shop around" all you want, but no quote will be binding at all until you have a signed purchase contract for a house, apply for the actual loan and lock in a final rate. Rates fluctuate on a daily basis.
Answer by Realtoratheart
All you are going to find on line is an estimate. To have a factual rate, you'll need to apply with a lender and select the loan program that bests suits your financial goals.
Answer by godged
An application fee is crap, typically a reputable lender will not charge this fee. I strongly suggest you stop using internet lenders and toll free numbers. Contact local lenders and I suspect you will not have to pay to kick the tires. Be sure to compare more than interest rates, ignoring potential closing costs could cost you thousands. Ask to be pre-qualified (so you know to what amount you could potentially spend), the interest rate you can expect, estimated closing costs and potential monthly payment. Know your budget, if you can afford about $ 1,000 a month, do not lock yourself into a $ 1,500 a month payment because a lender said you were pre-qualified for that amount.
