Mortgage interest rate – Paying points.?

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I recently got a mortgage loan. I paid 2% (two points) to have my rate lowered. Should my rate be 2% lower that what it should be at the time? I have excellent credit. What I got is very low rate, but, its not 2% less than the rate available. More like 1% less.
We got the loan and used it for purchasing a home. So, is there anything I can do about it now? Can get money I paid for points back.

  1. Reply
    May 16, 2011 at 3:59 am

    Hi: You paid points to get a loan with a lower rate, so that doesn’t exactly mean that you are entitled to a loan with exactly 2% difference. Plus, remember that the rate that you know is the nominal interest rate, the real (or effective) rate is almost always going to be higher – look in your paperwork to see how much you’re really paying in interest. For example, my 6% nominal interest rate mortgage is really 6.32%.

    Depending on your juristiction, you may be able to claim the prepaid interest (points) and your paid interest (on your mortgage) on your tax return. Check with a tax advisor to see if this makes sense.

    Good luck!

  2. Reply
    May 16, 2011 at 4:44 am

    In reality you could have paid the points for a variety of reasons, Loan to value, credit, debt ratios. Its not always about just having a good credit score. each point you pay normally equates to a 0.3-0.5% better in actual interest rate. The good news is you locked in a lower rate for the life of the loan. And where the rates are now you probably never going to do better.

    You can deduct the points paid as long as they were paid by you and not the seller from your taxes as prepaid interest. Most advertised rates that you see in commercials are with 2 points or more.

    Dont think of points as a bad thing. You paid more up front so that your payments/interest rate would be less for the rest of the loan term. You locked in lower interest rate and payment by doing so.

    Your broker/banker should have informed you that there were points. Not doing so is not illegal but is unethical. There is very little that you can do at this point as purchases have no right of recision period.

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