Friday, September 26, 2014
Thursday, September 25, 2014
Four Reasons Why Seller-Paid Points Matter
‘Seller-paid points’ refer to circumstances in which the seller pays points to reduce the interest rate on the buyer’s mortgage. A sample scenario: A home is listed for $200,000. The seller is willing to accept $193,000. If the seller reduced the price to $193,000, the buyer would be able to purchase and both would walk away happy. However, if the price remained $200,000, the buyer could ask the seller to contribute $7,000 in closing costs – and both would still walk away happy. The latter is much more beneficial. Here are four reasons why seller contribution to closing costs benefits the buyer.
1. Your interest rate and monthly payment will be lower. Interest rates and monthly payments are always lower (rates typically 0.5 percent-0.75 percent lower) when the seller pays closing costs instead of reducing the price.
2. It’s easier to qualify for a mortgage. Because your interest rate and monthly payments are lower, your debt ratio may also be low, resulting in an easier approval process.
3. You’ll pay less interest over the life of the loan. Your total savings will likely be more with seller-paid points – often 2-3 times more.
4. The IRS allows free tax deductions. The IRS accepts tax deductions for seller paid-points, meaning you can claim $7,000 in closing costs that year, even though they were paid by someone else on your behalf.
Source: HomeQB.com Judy Gratton Your Real Estate Edge
‘Seller-paid points’ refer to circumstances in which the seller pays points to reduce the interest rate on the buyer’s mortgage. A sample scenario: A home is listed for $200,000. The seller is willing to accept $193,000. If the seller reduced the price to $193,000, the buyer would be able to purchase and both would walk away happy. However, if the price remained $200,000, the buyer could ask the seller to contribute $7,000 in closing costs – and both would still walk away happy. The latter is much more beneficial. Here are four reasons why seller contribution to closing costs benefits the buyer.
1. Your interest rate and monthly payment will be lower. Interest rates and monthly payments are always lower (rates typically 0.5 percent-0.75 percent lower) when the seller pays closing costs instead of reducing the price.
2. It’s easier to qualify for a mortgage. Because your interest rate and monthly payments are lower, your debt ratio may also be low, resulting in an easier approval process.
3. You’ll pay less interest over the life of the loan. Your total savings will likely be more with seller-paid points – often 2-3 times more.
4. The IRS allows free tax deductions. The IRS accepts tax deductions for seller paid-points, meaning you can claim $7,000 in closing costs that year, even though they were paid by someone else on your behalf.
Source: HomeQB.com Judy Gratton Your Real Estate Edge
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