Our financial system is crumbling this week.

[Popeye_Card]

I think there is a Wells Fargo Bank in CA offering 4.78% on their website. I'll look later to see if I can find it. Heard it on the news.

The Wells Fargo website has that rate listed in their "Today's rates" section. It does not say if if you to pay any points to get that rate.

https://www.wellsfargo.com/mortgage/rates/

FYI, if ya'll haven't been paying attention this week, now is a good time to lock in a new rate. I was able to lock in a 4.75% rate on 30 years with 1 point. Or there was an option for 4.875% with a quarter point. (with Wells Fargo)

[cardinalkarp]

To a person not knowing much of anything about mortgages (me). What's the point and the 1/4 point stuff?

[Popeye_Card]

To a person not knowing much of anything about mortgages (me). What's the point and the 1/4 point stuff?

A point is 1% of the loan's total value. You can pay them to get better rates. For example, let's say you could pay 0 points on a $200k loan and get a 5.25% rate. Or, you could pay 1 point ($2000) and get a 4.75% rate. The point doesn't apply against your principal. It's basically buying a better rate. Usually, they'll pay for themselves over ~5 years.

[Freed Roger]

To a person not knowing much of anything about mortgages (me). What's the point and the 1/4 point stuff?

A point is basically a fee (or interest) paid up front to secure a lower overall interest rate. One point on loan of $100,000 would mean $1000 paid up front. quarter point would be $250.

Whether its worth it to pay this fee for a lower interest rate is the question. For example - is it worth paying $1000 point to get a 4.75% interest rate versus not paying the point and having a 5% interest rate? Any lender can run the loan schedules so you could see how long it would take to recoup your point payment.

[cardinalkarp]

Thank you! I knew it had something to do w/ buying your rate down but I wasn't sure of the specifics.

I may have to look into refinancing. How much did it end up costing you in total (after all the closing costs) Popeye?

[Popeye_Card]

Any lender can run the loan schedules so you could see how long it would take to recoup your point payment.

If you have a newer version of Excel, you should have a built-in template for a Loan Amortization Schedule that you can play around with yourself.

[Freed Roger]

To a person not knowing much of anything about mortgages (me). What's the point and the 1/4 point stuff?

A point is 1% of the loan's total value. You can pay them to get better rates. For example, let's say you could pay 0 points on a $200k loan and get a 5.25% rate. Or, you could pay 1 point ($2000) and get a 4.75% rate. The point doesn't apply against your principal. It's basically buying a better rate. Usually, they'll pay for themselves over ~5 years.

popeye was quicker on the draw. It makes sense to pay the point and buy a lower rate when you plan on keeping the property for at least a few years, and if you don't expect rates to go down much during that period.

years ago I made the mistake of paying a point for a lower rate - a year later the rates dropped and I was able to refinance to a much lower rate. I didn't need to pay that point to get a lower rate.

[Popeye_Card]

Thank you! I knew it had something to do w/ buying your rate down but I wasn't sure of the specifics.

I may have to look into refinancing. How much did it end up costing you in total (after all the closing costs) Popeye?

I ended up rolling my closing costs into the loan, which may not be the best plan, but for me it basically re-starts my original loan amount now (I've had my house for 2.5 years), just with a much lower rate.

A closing should cost ~$2000, plus whatever points you pay. The payoff on your existing loan balance is usually a tick higher (~$1000) than your current remaining balance as well to cover fees. If you refinance with your existing lender, they may be able to shave some costs here and there.

[cardinalkarp]

Thank you! I knew it had something to do w/ buying your rate down but I wasn't sure of the specifics.

I may have to look into refinancing. How much did it end up costing you in total (after all the closing costs) Popeye?

I ended up rolling my closing costs into the loan, which may not be the best plan, but for me it basically re-starts my original loan amount now (I've had my house for 2.5 years), just with a much lower rate.

A closing should cost ~$2000, plus whatever points you pay. The payoff on your existing loan balance is usually a tick higher (~$1000) than your current remaining balance as well to cover fees. If you refinance with your existing lender, they may be able to shave some costs here and there.

Thanks for the info!

[Popeye_Card]

popeye was quicker on the draw. It makes sense to pay the point and buy a lower rate when you plan on keeping the property for at least a few years, and if you don't expect rates to go down much during that period.

years ago I made the mistake of paying a point for a lower rate - a year later the rates dropped and I was able to refinance to a much lower rate. I didn't need to pay that point to get a lower rate.

I could be making that mistake now. Though I don't anticipate mortgage rates ever getting much lower than 4.75%. They always could, but I was able to shave $300 a month off of my monthly payment today. Even if that ends up being a mistake in the long run, that's still a very positive mistake over my existing payment.