which is a better mortgage loan?

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I am not sure what is a better home loan option:
5.75% no pts, pay closing or
6.125% no points and no closing cost?

2 Comments
  1. Reply
    john565656
    April 29, 2011 at 11:30 pm

    With the Fed action today every rate you have been quoted will or has fallen DRAMATICALLY.

    You should get re-quotes fast — and lock it in.

    against those though… take the higher rate and no CC. You’ll be able to re-fi later at a lower rate.

  2. Reply
    dioncornel
    April 29, 2011 at 11:47 pm

    The answer depends on you. What you need to do is figure out the difference in payments between the two options. Divide the the amount of closing costs by this difference. This will give you the number of months when both loans break even. The higher interest rate will be better at the beginning of the loan up to the break even point since you would not have paid any upfront fees, even though the payment is higher. From the break even point and into the future, the lower rate is obviously the better option as you will have recouped the costs of the closing costs and every month you are paying less payments.

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