Rental Property Investor · Gilbert, AZ · Member since 2020 · 210 posts · 163 votes
5y
Hi @Jaleen Anderson, it really depends on the buyers long term goals and what they're looking for. For example, most of my current deals I try to have zero loan points because I care more about having enough capital towards future deals than I do about getting a 0.25 or 0.5 point reduction since rates are the lowest they've ever been historically. The other thing I look at is my exit strategy; for example, if I'm planning to refinance in the short term (a few years) then a point buydown doesn't make a lot of sense. However, if the buyer is looking to purchase with a 30 yr mortgage and hold the property for that term without refinancing or selling, then I'd say go for it. You'd just need to crunch the numbers and calculate the ROI duration based on the upfront points amount.
I think you are asking about making additional payments on your monthly mortgage in order to pay off your loan faster - is this correct? If so, again it all depends on your goals. How much faster do you want to pay it off, and why? The most simple way to look at it is to see how much of your monthly payment goes to principle and how much to interest. Paying an additional amount equal to the principle payment will cut your payoff time in half. Of course your principle amount goes up each month, so you have to increase your additional payment each month. You can also find simple mortgage calculators online that will allow you to enter a flat additional amount each month (say $50) along with your loan terms and it will calculate how much interest and how many months of payments you save over the life of your loan.
@Jaleen Anderson For me it depended on the loan amount and how much rent I take in as well as what my cash flow is.
I'm in a rural area and my loans aren't that big so I decided about 1/3 of each mortgage payments. It leaves some of the cash flow to go into reserves as well as all of my CapEx.
Originally I was trying to match the principal each month but decided that was not wise because part of it was having to come out of my pocket and that wasn’t sustainable as I scaled my portfolio.