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Financial Fitness

November 21st, 2011 5:56 PM

I’m often asked what my best rate is. To really
understand rates, you have to understand a bit of math and how rates are quoted.
Rates are always quoted with points. A point is 1% of the loan amount. As an
example, let’s say we can get 4.0% with 0 points or 3.875% with .375 points.
Which is the best deal? A simple way to figure it out is to do this
calculation: There is one eighth percent difference between 4.0% and 3.875% and
the cost difference is three eighths (.375). So I divide 3 eighths by 1 eighth.
The answer is 3, so in 3 years I could pay for the 3 eighths I pay up front for
the eighth difference in the rate. You can also look at the difference in the
payment between the two options and divide that number into the point cost. That
isn’t quite as accurate and will give you a slightly longer period of time (Too
complicated to explain here). Feel free to call or email and I figure this out
for you either with my rates or someone else’s.

Posted by Cary Brooks on November 21st, 2011 5:56 PMPost a Comment (0)

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