August 29, 2022
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TECH IDEA
Points charged are less and the interest rate is lower and easier to buy down. And the mortgage is paid off 5 years sooner. Meaning equity grows faster.
For example – currently the 30 year fixed is 6% and 1 point. 25 year is 5.75% and no points (saving $4,000 upfront on a $400,000 mortgage.). The payments are then $2,399 for a 30 year fixed and $2517 for the 25 year fixed loan. So you could save $4,000 upfront and pay $118 a month more and break even at about 3 years. But if you put the same point of expense towards a buy down the 25 year rate to about 5.0% the 25 year payment goes down to $2,339. Saving $60 a month and paying it off 5 years earlier! On the 30 year 6% portion after 10 years you’ve paid off $68200 and with the 25 year same points at 5% you’ll have paid off $92,400.
If the numbers are confusing talk to your local lender and have them explain it.
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Conversation Advancer of the Week:
Setting the Stage on a price lower than what the sellers expect.
“Wow, thanks for showing me your home. As we getting into my professional pricing analysis I said WOW! I see you bought the home in September of 2017 for $340,000. If you had known then that the value in 5 years would be over $520,000 you would’ve been thrilled – that’s like $35,000 a year in appreciation. Congratulations. Heres my spreadsheet showing you what your homes value is today.”
This can lessen the disappointment or “Im losing money” when they expected the home to be worth $600,000.
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