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URL:  http://boards.fool.com/dwdonhoff-great-post-about-points-i-have-one-14824839.aspx

Subject:  Re: Refinancing without paying points? Date:  4/23/2001  11:59 AM
Author:  spinning Number:  19534 of 128688

Dwdonhoff, great post about points. I have one question, maybe proposing a fourth side of the triangle.

If you have the cash to pay points, you also could use the cash to increase the downpayment and lower the principle. What are the advantages and disadvantages of this?

I looked at the payments based on your table of rates and points and the payments were lower if you paid more points and increased the principle accordingly. So, if you keep the loan 30 years, paying points is better than a bigger downpayment. Is this generally true or does it change as the rate table changes?

If you pay off the loan early, then the higher original principle means you owe more at payoff. Is there a rule of thumb for determining the breakeven point?

Another way to think about it is this. What if, in addition to paying points, increasing the principle, and thus lowering the payments, you made the same payments as the par loan. How long until your remaining principle is less than on the par loan?

Also, suppose you were thinking of a downpayment well above 20%. Is there a maximum number of points you can pay? Do you still get the above advantage with 5, 10, etc. points?


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