Explain mortgage points to me

[LivingAlmostLarge]

Debbie, people move usually in their 20s. If you bought a condo at 22 and had kids would you move? Likely yes, especially if you bought a 1 bedroom condo.

Everyone I know has had at least 2-3 houses, but I live in an expensive area. It's hard to get into a single family first try. So they move. I've say 5-7 years between moves in general to build equity then make the leap.

Also in Canada, you don't have the same military we do. Military people move every 3-4 years and many do buy homes. Thus they buy and sell a lot. Especially in certain areas where the bases are large.

[disneysteve]

if you have a $100,000 loan and you have 2 points of money to spare (2K). . .why not just prepay your current mortgage by $2000?

That would shorten the term, but not lower the payment. Refi and pay the points and I can shorten the term AND lower the payment. Not saying it is the right way to go but it could result in a lower total paid back over the life of the loan. Plus, if I keep making the same payment that I had before the refi, it would shorten the term even more.

As I said, I need to run the numbers and see which saves the most in the long run.

[tripods68]

Steve,

Have you done analysis of all your taxable investment expected return in the next 10 to 15 years and factor in inflation rate and mortgage cost? Which ever comes ahead makes its easier decision whether to refinance versus or paying it off with your taxable accounts. The dollar is worth more today than tomorrow.

Being in Finance, we make this type of projections all the time. It might be appropriate in your case to do this.

[disneysteve]

Steve,

Have you done analysis of all your taxable investment expected return in the next 10 to 15 years and factor in inflation rate and mortgage cost? Which ever comes ahead makes its easier decision whether to refinance versus or paying it off with your taxable accounts. The dollar is worth more today than tomorrow.

Being in Finance, we make this type of projections all the time. It might be appropriate in your case to do this.

True. I'm just looking at the options and trying to make sure I understand them all. Points are one of those things I was never quite sure I understood entirely, hence this thread. I may not refi at all regardless of rates, because it may not be worth the effort. Just tossing around ideas.

[Scanner]

DisneySteve,

No. . .it doesn't always make sense to pre-pay the mortgage but it's just another factor in deciding the finances of it.

If you have $3000-5000 to burn in closing costs. . .maybe it makes sense to prepay your mortgage by that amount vs. refinancing.