Before you make such a decision, you have to understand exactly what points are. Borrowers pay points to lenders when a loan is settled. One point is 1% of the mortgage. A $100,000 requires a $1,000 payment for one point.

The idea behind points is to lower the overall interest rate on the home loan. There are different ways of calculating the advantage of a point, depending on the lender, but an example would be if you paid 1.5 points to reduce your loan from the posted rate of 6.25% to 5.875%, or to 5.375% if you paid 2 points.

The longer you plan to live in the home, the more sense it makes to pay points; you also have to decide if you can afford to pay the points. Borrowing to pay points makes little sense, since the concept is to save interest, not pay it. For many first time home purchasers, points are not a good investment, since they may want to move to a different home in the near future.

Points need to be viewed as an investment in the mortgage. Let’s say you’re thinking about paying 1.5 points to get a reduction in your mortgage rate from 6.00% to 5.50%. What you are actually doing is paying a part of your mortgage interest ahead of time.

There are many sites on the internet that can help you calculate how much you can save in monthly home loan payments by paying upfront points, based on the length of the loan or you can take the easy way out and call a mortgage professional to do it for you.

The $100,000 loan we are discussing would require $1,500 in points to lower the rate to 5%. It is necessary to find the breakeven point on how valuable this $1,500 investment will be. A $100,000, 5.5% fifteen year mortgage will have a payment of $599.55 per month. The cost of a $100,000, 30 year loan at 6% would be $567.79 a month.

This is a clear savings of $31.76 per month, but don’t forget you had to pay $1,500 to get this savings. $1,500 divided by $31.76 is 47.23 months, or almost four years. In other words, if you don’t plan on being in the home for about 4 years, you get nothing by paying the points.

However, once the 47.23 months have elapsed, each month payment is a savings. If, a very big if in today’s mobile society, you lived in your home for the full thirty years of the mortgage, and multiply the $31.76 per month savings for thirty years, you would save $9,933.58 over the entire term of the loan!

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Obtaining a loan to purchase a home can be an expensive proposition. Many times, people may be tempted to re-negotiate their older, higher rate mortgage when rates come down. It is important to consider this carefully and be sure any savings you have are not eaten up by the closing costs on the loan.

When a bank establishes a mortgage, it incurs expenses to do so. For the most part, many of these expenses are not determined by the bank, but are fees they are charged and pass onto the borrower. There are some fees over which the bank has control, and if they are aggressively seeking new loans, they may reduce or eliminate them.

Closing costs can include: -Application fee -Origination fees (or points) -Attorney fees -Transfer taxes -Recording fees- -Appraisal -Surveys and

There may be taxes and additional fees by the state as well.

As a prospective re-financer, you may want to know which of these costs can be reduced, or even eliminated, such as their application fee, and which are not under the bank’s control. As we mentioned, sometimes lenders are aggressively seeking new clients, and they may have special programs where certain fees are waived. The application fee is the most often waived, since this is a charge the bank itself makes. Other fees, that are just pass-through fees, such as attorney fees or appraisal fees will most likely not to be waived.

One of the first steps you should take is to get a good faith estimate of the closing costs. Then you can analyze them. One of the dangers of being offered a lower rate may be that the bank inflates the closing costs to make up for the reduced loan rate.

You can get an estimate from other banks, and then you will be able to compare the line by line items. If your bank’s charges seem a great deal higher, you should question them. Some fees, such as an appraisal or a credit check, should be fairly similar in the same geographic area. If there are exorbitant charges, ask to negotiate them.

After you have negotiated lower closing costs as much as you are able, you should now make sure the deal is worth it. Mortgage calculators are available on the net, and you can calculate the total cost left on your current loan and the total cost of the new loan.

Don’t forget that the new loan will now also cost all of the closing fees you will have, so add them to the calculation. You will now know whether or not a re-financing is a good idea or not. This is not a lot of trouble to go to since it may save you a substantial amount.

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The last thing most homeowners want is to be caught up in a foreclosure, but what usually happens is that it catches them off guard, no matter how many warnings. Most people think they will find the time or the money to do something about it. But understanding how the foreclosure process flows will help the borrower avoid it.

Step one is when the first loan payment is missed. The bank will normally send out a delinquent notice. The homeowner should try to get the payment out as quickly as possible, even if it is late. If he still can’t he should let his banker know as soon as he can.

If the homeowner misses another payment, the lender will usually make direct contact. Remember, if the bank has not heard from the borrower, they cannot know if he is incapacitated or even dead! The worse thing to do is avoid these phone calls. There is still hope and they will attempt to help you find a solution to your payment issue.

If the borrower fails to make the third month’s payment, the loan will be considered in default. Now, the borrower will receive a certified letter giving the borrower dates by which settlement has to be made. The official title of this document is a Demand Letter or a Letter to Accelerate; if the homeowner ignores it, the foreclosure proceedings will begin.

This is usually the point when most homeowners have given up, but the lender is always willing to try to come to an agreement.

The fourth missed month will force the bank to nullify any conditions offered in the letter to accelerate and at this point they have given up on the loan. This means lawyers, and of course that adds even more to the money due to the bank. If nothing is done now, the home will be offered at a sheriff’s sale or public trustee sale, depending on the state.

The date of sale is the actual date of the foreclosure. The lender is obligated to notify the homeowner, post notification on the house, and publish it in a newspaper. It is still not too late for the homeowner to take back possession of the home, but it will be very expensive.

What do all of these steps teach us concerning the steps of foreclosure ? At each month’s delay, the homeowner is encouraged to contact his lender. The most critical aspect of running into difficulties with your lender is keeping the communication lines open to work out a problem you both want to resolve.

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