I have a house under contract, renter ready to move in and my lender is getting squirrelly on me and asking me to make changes to my tax return that I’m not super comfortable with and they are charging $6k in origination fees for a $120k mortgage. I’m considering a couple of options and would like some opinions:
1.) find a new lender-save the huge origination fee and buy down the points- KW Mortgage will charge me $0 origination as my wife is an agent.
2.) Pay cash and refinance later- this makes my wife nervous because she’s worried about rates going up. We have the cash but I’d prefer to use leverage.
3.) stay with the current lender and have my CPA make the adjustments.
Which would y’all choose? Any options I am not thinking about.
KW Mortgage is awesome.....can you still close on time if you switch lenders? or can you extend closing date? Why buy down points? Interest rates are already super low right now.
Why pay cash if you can fix interest at super low rates now?
To me it is weird that your current lender is asking you to change tax returns. That sounds shady to me.
What is it about your taxes that they want changed? Does it sound reasonable, meaning most lenders would want this item changed or does it sound like a one off type situation that only that lender might want?
As to change lenders, yes time frame should be a consideration. As far as points, in my opinion, if the pay back time is between 2-5 years and you plan on being in that loan for 2-5 years, then yes, buy points down. It will benefit you for the life of the loan, they are tax deductible as well. Most of my buyers, buy points because it almost always makes sense. It only doesn't make sense, if you have a short time horizon for being in that loan.
Don't forget, when calculating pay back time, take the tax bracket that you are in, and subtract that percentage of cost off the discount points, because if you itemize, then you can deduct that percentage off your costs. Then after knowing those numbers, then divide by the monthly savings to get the true payback time frame.
I.E. $5000 in discount points, you are in a 24% tax bracket and will itemize. 5000 X .76% = 3800.00 after tax cost divided by let's say a $120.00 per month savings = a pay back time of 31.66 months. If you do a 30 year mortgage, your lifetime savings is $39,360.00 after recouping your initial costs.
Correctly done math doesn't lie. Always fully crunch the numbers and you will come to the same conclusions I do. In almost all cases, buying points is worthwhile!!!
I hope this helps.
I have an investor friendly one out here in CA and use him for all my deals. Happy to share contact.
@Bruce Lynn paying cash would be a short term answer so we get closed on time. We would then refinance in a few months but my wife is worried about rates rising.
I think it will take too long to switch to KW mortgage on this deal.
@Kevin Romines that is a lot of great information, so first and foremost thank you.
We are up against the end of the contract so I think we are stuck with the current lender or paying cash then refinance out in the future when rates might be higher. That’s the reason we might be looking at buying down points.