Purchasing a Home

[bu villain]

Buying points is not necessarily a good idea. If you plan on staying in the home for only a few years, a 1% or so interest rate difference is not going to amount to much at all. You may be better off investing that money in other financial vehicles. Like most finanace, you have to figure out what your plans are and then run the numbers to see what makes the most sense.

Also I think you are mistaken about bi-weekly payments. You are implying that they effectively lower your interest rate just for splitting your payment in half. The real savings from bi-weekly payments is because you are effectively making an extra monthly payment every year which goes straight to principle.

Monthly payments: 1 year = 12 months = 12 full-sized payments
Bi Weekly: 1 year = 52 weeks = 26 (half-sized) payments = 13 full-sized payments

So bi-weekly payments are basically the same as monthly payments if you just pay an extra payment toward principle during the year. Run the numbers on an amortization calculator and you can verify it. If the bi-weekly format is easier than making an extra payment during the year, then go for it but the amount you pay in principle and interest would be almost exactly the same.

[blaknoize]

Buying points is not necessarily a good idea. If you plan on staying in the home for only a few years, a 1% or so interest rate difference is not going to amount to much at all. You may be better off investing that money in other financial vehicles. Like most finanace, you have to figure out what your plans are and then run the numbers to see what makes the most sense.

Also I think you are mistaken about bi-weekly payments. You are implying that they effectively lower your interest rate just for splitting your payment in half. The real savings from bi-weekly payments is because you are effectively making an extra monthly payment every year which goes straight to principle.

Monthly payments: 1 year = 12 months = 12 full-sized payments
Bi Weekly: 1 year = 52 weeks = 26 (half-sized) payments = 13 full-sized payments

So bi-weekly payments are basically the same as monthly payments if you just pay an extra payment toward principle during the year. Run the numbers on an amortization calculator and you can verify it. If the bi-weekly format is easier than making an extra payment during the year, then go for it but the amount you pay in principle and interest would be almost exactly the same.

My aunt does this with her mortgage. However, she pays two full payments bi-weekly.

[bu villain]

My aunt does this with her mortgage. However, she pays two full payments bi-weekly.

This actually reminded me. You should always look at 15 year mortgages when buying. Since they have lower interest rates, they aren't that much more monthly than the typical 30 year and if you can't afford a little higher mortgage payment, you should really consider whether your buying too much house.

[blaknoize]

This actually reminded me. You should always look at 15 year mortgages when buying. Since they have lower interest rates, they aren't that much more monthly than the typical 30 year and if you can't afford a little higher mortgage payment, you should really consider whether your buying too much house.

I heard that the banking world rarely offers such loans. I'd love to have a shorter more expensive loan. Get that over with.