Paying Points on a Mortgage

What are Points on a Mortgage Loan?

Mortgage points are fees paid on a loan to reduce the interest rate of your mortgage.  If you add an extra 1% to the fees on your loan your interest rate will be lower. Paying for points on a mortgage is essentially a trade of upfront money for a lower interest rate.

Why buy down your interest rate with  points?

Buying down your interest rate means that your monthly payment will be lower.  To determine whether this makes since to do simply divide the points dollar amount by how much money you save each month.  This will tell you how many months it will take to pay back the points amount.  Determine if you will be in the house that many months to start saving money.

No Point Loans

There are such things as no points and no fees loans.  Here are some reasons why someone would choose one of these options.

  1. No money for down payment and fees on a purchase. When you purchasing a new home and do not have the money for the down payment, a  mortgage with no closing costs can make up the difference of the down payment.
  2. If the estimated time you will be staying in the home is less than it takes to make up the money you spent on the points. Typically this can take anywhere from 3-5 years to recoup the difference.
  3. No equity in the house to pay closing cost when refinancing. No closing cost may allow you to complete the refinance, but your rate will be higher.

So ask your Loan officer about the possibilities of paying points and no fee loans.


Credit Card Rewards – Are They Worth It Now?

credit card rewards pointsToday credit card companies are doing everything to lure you into getting their credit card. Not only are banks scaling back on their offers, but credit card companies are also following along. The usual “lure ‘em, catch ‘em and leave ‘em” approach is what most all credit card companies are adopting now-a-days. If they offer a product or service that does not generate enough money to continue the program they will either cut the rewards program or the most common is to raise the fees.

People think that the Credit Card Act of 2009 is going to make plastic that much safer, but that is not the case as we are not safer now as compared with previous months. What the Credit Card Act of 2009 will do is make it harder for the consumers as credit card companies are now finding more innovative ways of making up for the lost revenue. (Look at this post about CitiBank raising their rates to 29.99%!) Bank of America announced that it will impose an annual fee ranging between $29 and $99, right after they said they would not be raising interest rates before the second phase of the CARD Act, which goes into effect on February 2010.

On top of all of the rate-hiking, fee-adding and credit limit-cut backing card issuers, they have found other ways of adding to their bottom line, by making changes to how you can use your rewards points. Some policies have become so stringent that for many consumers, they are having to say goodbye to in-flight upgrades, free hotel stays or using their points for that special something they have been saving up for, sometime for years.

Some people have no idea the kinds of changes that are being made to your credit card rewards programs, you might want to check the list below to see if you are affected.. yet.

  • Most major credit card companies including American Express, Bank of America, Chase, Discover, Capital One and Citibank will invalidate any rewards points accumulated in a billing cycle during which a cardholder’s account was delinquent.
  • Discover Bank goes a step further by revoking all point or miles earned by an account holder under the rewards program if he is late in his payments for two consecutive months.
  • Discover’s three-tier cash back program is now down to just two tiers. In the company’s previous scheme, a consumer earns 0.25% percent for the first $1,500 spent, 0.5% for the next $1,500, and 1% for whatever amount spent above $3,000. Presently, the program has been reduced to just 0.25% for the first $3,000 and 1% for anything over that.
  • American Express scaled back the rebate for its Blue Card cash-back program, now offering 1.25% instead of the previous 1.5%.
  • American Express is also increasing the maximum fee that accountholders under its Membership Rewards program would need to shoulder to transfer earned points to a U.S. airline loyalty program. From $75, the cost is now at $99 effective last September.
  • Citibank has also made changes to its travel redemption program. A domestic round-trip airline ticket worth about $400 used to cost the cardholder 20,000 points. Now redemption for the same item will require 40,000 points.
  • Starting next year, the Citi Hilton HHonors Visa will require 12,500 points, up from 10,000, for a free room.
  • The Citi Home Depot Rewards MasterCard will be discontinued. Cardholders can only use them until October 31, while rewards points may be redeemed only until January 31, 2010.
  • The Citi mtvU Visa card, which allows students to earn points that are convertible to cash for student loan payments, now requires 12,700 points for every $100. That used to be 10,000 points.

The most unpleasant surprise for credit card customers is that any credit card company can change the terms and conditions to any of their rewards programs at any time, or even cancel it altogether for any reason. All of those built up points could go to waste, maybe the very reason why you joined the credit card company and now you cannot even use your points for the rewards you wanted.

Do not expect these changes to go away because they are here to stay for good. Banks are still making difficult decisions as they need to balance profitability and services so it would be wise for the consumer to act fast and cash in on their rewards points sooner than later, or risk losing out.