| CLOSING COSTS | 6% + no points | 5.75% + 1 point | 5.25% +3 points | | | Appraisal Fee | $300.00 | $300.00 | $300.00 | | | Courier Fee | | | | | | Credit Report | $18.00 | $18.00 | $18.00 | | | Deed Transfer Tax | $1,000.00 | $1,000.00 | $1,000.00 | | | Discount Point (s) | $0.00 | $0.00 | $1,963.78 | < 2 points | | Document Preparation | | | | | | Flood Certification | $18.00 | $18.00 | $18.00 | | | Mortgage Broker Fee | $0.00 | $0.00 | $0.00 | | | Notary Fee | $25.00 | $25.00 | $25.00 | | | Origination Point | $0.00 | $965.00 | $965.00 | < 1 point (see below) | | Pest Inspection | | | | | | Processing Fee | $0.00 | $0.00 | $0.00 | | | Real Estate Agency Fee | $0.00 | $0.00 | $0.00 | | | Recording Fees | $120.00 | $120.00 | $120.00 | | | Septic Inspection | | | | | | Settlement Fee | $125.00 | $125.00 | $125.00 | | | Survey | | | | | | Tax Service | | | | | | Title Endorsement | $150.00 | $150.00 | $150.00 | | | Title Insurance (Basic) | $858.75 | $858.75 | $858.75 | | | Underwriting Fee | $0.00 | $0.00 | $0.00 | | | Well Inspection | | | | | | TOTAL CLOSING COST | $2,614.75 | $3,579.75 | $5,543.53 | < cash to close increases |
Origination Point: FHA mortgages require the first "loan point" or fraction thereof to be listed as an origination fee. So if you're quoted an interest rate of 5.75% + 1 point, that point is listed as origination, additional points are listed as discount. As you can see, 1 point is costing you $965 for an interest rate of 5.75%, 3 points ( one point origination + two points discount) are costing you $2,928.78 for an interest rate of 5.25%. Now let's look at what you're getting for your money. | MONTHLY MORTGAGE PAYMENT | | | | | | | | | INTEREST RATE | 6.000 % | | 5.750 % | | 5.250 % | | TERM | 30 Years | | 30 Years | | 30 Years | | Principal & Interest | $588.69 | | $573.00 | | $542.20 |
If you pay "points", your mortgage payment will be lower, again, because you are pre-paying some of the interest. Does it make sense to pay points? Let's do the math. You did not pay points in column one, and we will compare the one point rate and three point rate against column one.
You paid $965 at closing to save $15.69 every month. So divide $965 by your monthly savings of $15.59 and you will get 61.51 months. If you are going to remain in the house and on this mortgage for more than 61 months (a little over 5 years), this option makes sense. Now let's look at the three point option. The cost is $2,928.78 (1 point origination + 2 discount points), divide you investment, $2,928.28/$46.49 (monthly savings), and you will get 20.76 months. So if you're willing (and able) to pay $2,928.78 at closing to save $46.49 per month, you will pay back your investment in 21 months. A little less than 2 years. "Should I pay points"? - it depends on how much cash you are willing to pay at closing, how long you feel you will remain on the mortgage and the interest rate with an without points. Sometimes, a point or two can make a dramatic impact, sometimes it doesn't make sense. You have to do the math. Simply obtain an interest rate with no origination and discount points and compare the payment and cost with other rate/point options. Click on the APR calculator to estimate the cost of mortgage loans with and without points. You can calculate the cost of points with this calculator. APR Calculator & Interest Rate Cost Comparison | What's APR?  Find information on the PA Home Buyer Page for Pennsylvania first time home buyer programs, seller assist, information on FHA/VA and a variety of home buyer mortgage calculators, including good faith estimate calculators (GFE).
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