Author Topic: Breakeven period for points on mortgage is around 7 years....take it or no?  (Read 1509 times)

KiloRomeo

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I've been running the numbers and no matter what mortgage option I pick, the breakeven point for points on a mortgage is about 7 years for me (excluding any sort of tax affect). Ideally we would keep the house longer than that and turn it into a rental but who knows. Any other thoughts or suggestions regarding points? At this point I think I will pass.

LAGuy

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Re: Breakeven period for points on mortgage is around 7 years....take it or no?
« Reply #1 on: September 14, 2015, 04:14:35 PM »
Well, the real question isn't if you plan to keep the property 7 years, but if you plan to keep the mortgage that long. In the current low rate environment, I think it's safe to say that you most likely won't see a refinance opportunity, so perhaps you might keep it that long.

In the end though, I don't think points are ever really worth it. You're essentially locked into that 7 year break even period. If you want to reduce the amount of interest you pay in that period, there's other options available to you...such as paying down principal early. About the only time I can see points making sense is if you need the tax write off now. For instance, if you were planning to retire soon, you could pay the points and realize the tax write off now whereas down the road you might not have any income to write off (or you'll be in a lower tax bracket later on, etc).

KiloRomeo

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Re: Breakeven period for points on mortgage is around 7 years....take it or no?
« Reply #2 on: September 15, 2015, 11:17:34 AM »
Well, the real question isn't if you plan to keep the property 7 years, but if you plan to keep the mortgage that long. In the current low rate environment, I think it's safe to say that you most likely won't see a refinance opportunity, so perhaps you might keep it that long.

In the end though, I don't think points are ever really worth it. You're essentially locked into that 7 year break even period. If you want to reduce the amount of interest you pay in that period, there's other options available to you...such as paying down principal early. About the only time I can see points making sense is if you need the tax write off now. For instance, if you were planning to retire soon, you could pay the points and realize the tax write off now whereas down the road you might not have any income to write off (or you'll be in a lower tax bracket later on, etc).

Thank you sir, I came to the same conclusion.