IamLaura wrote: ↑Wed Oct 14, 2020 9:44 am
Thanks for the detailed explanation. I am trying to figure out how to compare the different quotes. Maybe I need to ask lenders to apply credits to make their offers zero fees so that I have a point of comparison. Does anyone have a calculator that can tell me how long I would have to stay in my mortgage to make paying a low fee for a lower interest rate worthwhile? I can’t find any that do that.
Yes, you can ask lenders what the fees/credits would be at a couple of different rate levels. For example, if one lender is offering 2.75% at no cost and another is offering 2.625% at some cost, you can ask the first one what would happen at 2.625% and the second one what would happen at 2.75%.
The fees that you care about are the ones that show up in sections A, B, and C of the loan estimate. (E also matters but will wind up being the same across all lenders even if it looks different initially). And you care about the lender credit.
In my recent experience, usually it takes 0.4-0.6 points to move the rate down by 0.125%. This corresponds to roughly a 4 year breakeven.
As far as the calculator goes, you can go look for an amortization schedule, but an easy way to estimate it is to calculate the 1-year interest savings based on the interest differential. For example, if you have two options where the rates differ by 0.125% on a $500k loan, then the first year's interest difference will be around $625. If the points required to get to the lower rate are $2500, then that means it takes around 4 years to break even (2500/625 = 4).
If you post your options here, we can try to help you evaluate them as well.
From the other thread, it looks like you're in CA. If your LTV is < 60%, you may want to check out Interactive Mortgage. They are advertising a no-cost 30-year at 2.5%.