July 2008 Vol. 3 No. 7
• Points: Pay Now or Pay Later • See Debbie on NECN • July's Home Value Improver • About Us

Points: Pay Now or Pay Later

Usually, when you hear mortgage rates advertised, the number to which you pay the most attention is the interest rate. You may occasionally hear about "points," but it's that magic interest rate that is central in people's mind. However, points can be a very important part of your mortgage's total picture. They can save you a significant amount of money over the life of your loan, but only in certain circumstances.

What is a point?

Paying a point allows you to lower your overall interest rate. For this reason, mortgages are often advertised as having lower interest rates, but include points. You might say it's a "pay now or pay later" situation. If you "buy" a point, it costs 1% of the amount of your mortgage and is paid at the closing. What might a mortgage with or without points look like?

  • If your mortgage amount is $360,000 and you are paying one point, you need to pay $3,600 at closing, above and beyond your other costs.
  • A $360,000 mortgage with no points and a rate of 6.75% will cost $2,335 per month.
  • A $360,000 mortgage with one point, which would get you a rate of 6.50%, will cost $2,275 per month.
  • The difference between these two payments is $60. Therefore, it will take you 6 years and 2 months to recoup the amount of money you spent on the point.

Figuring out if points are right for you is a pretty straightforward equation, and requires that you ask yourself two very important questions:

  1. How long will you be in the house? It is certainly not worth paying points on a home you only play to stay in for a couple of years. The example above does not allow for any actual money saved until 6 years into the life of the loan.
  2. Do you have the money? If you are scrambling just to get the down payment, you probably do not have the luxury of paying points. Don't panic. You can always try to reduce your payments later in the life of the loan if rates get better or anything else changes.

See Debbie on NECN
Deb on NECN 7-08 cropped

Debbie Siegel was interviewed by Peter Howe of New England Cable News' Business Day program on the day the Bush Administration announced plans to help bail out Fannie Mae and Freddie Mac from foreclosure fallout. See what Debbie had to say!

July's Home Value Improver

Make the great outdoors as cushy as the cozy indoors

We're in the heart of the New England summer, and you've probably been enjoying some quality time on your deck or patio. The good news is that there is still lots of outdoor time ahead of us. If you have found that your deck furniture or decor has not been lounge-worthy, now is a good time to make a move toward upscaling the outdoor portion of your home. Outdoor furniture and décor sales are in full swing, so if you take advantage of the timing, you can create yourself a whole new outdoor environment for a bargain.

If you haven't walked through the outdoor furniture section of your local home retailers in the past few years, you may not know that the days of tossing some old metal chairs in the back yard and calling it done are over. Today's deck furniture offers comfort, style, and convenience. And choices, oh the choices!

Decorators advise people to think of their decks as living space, similar to the rooms in the interior of the house. Like any decorating, a methodical step-by-step approach is best.

  1. Assess the space.
    Are there any repairs that need to be done? Repair loose boards, peeling paint, dripping air conditioners, or other unsightly or hazardous issues.
  2. Think about how you use your space.
    Do you use it primarily for socializing, reading, lounging, or other activities? This will dictate what type of décor you will want.
  3. Plan what type of furniture would work best.
    Do you prefer wrought iron or wicker? Is your space covered, and therefore thick, comfy cushions would be easy? Or, is your space totally exposed to the elements? Dragging cushions into the house every time it rains is a drag!
  4. Consider the position of the sun and shade during the time the deck is used the most.
    Also consider where you put your grill. You don't want your guests to get a face full of smoke at your next barbecue.
Benches with plants are an inexpensive way to jazz up an outdoor space, as is some paint. Freshly painted deck balusters will make the space look clean and new. Hit the sales! Beyond furniture, you can find outdoor wall hangings, fancy lights, benches, side tables, and lots of other stuff that can make your outdoor space feel wonderful.

I was pleased to appear with Peter Howe on New England Cable News this month to talk about the Fed's bailout of Fannie Mae and Freddie Mac.

With all the issues these companies are facing, it is more important than ever to contact a mortgage professional with questions regarding your mortgage or program guidelines. It can be frightening as a homeowner to read the paper and not understand how your largest investment may be affected.

As always, please feel free to call or email anytime for more information on any mortgage topic!

Best regards,
Debbie Siegel
Westchester Mortgage

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