points or no points--do you pay to get lower interest?

[Jane S.]

Would like to know how many of you buy down your interest rate when financing an investment? Month to month it makes cash flow "look" larger if interest is lower. But have to pay at closing ... esp with a refi, dont have any "new" cash flow yet. thanks for input!

[Anthony Gayden]

Originally posted by @Jane S.:

Would like to know how many of you buy down your interest rate when financing an investment? Month to month it makes cash flow "look" larger if interest is lower. But have to pay at closing ... esp with a refi, dont have any "new" cash flow yet. thanks for input!

 Yes, I have used points to get a lower interest rate before. It really is a mathematical equation. I just bought my interest rate down from 4.99% to 3.99% on two mortgages. The mortgage on each property was for $209,625. I paid $1729.41 in points on each property. This is a long term hold for me and I plan on owning them for at least 5 years.

$209,625 @ 4.99% amortized over 30 years = $1124

$209,625 @ 3.99% amortized over 30 years = $999.57

That's a difference of about $124 a month. After 12 months that is $1488. After 14 months, the saving in interest will have covered the cost of the points. Not only that, but for the next 28 years and 10 months, or whenever I choose to sell it, I will benefit from the lower mortgage payment.

Points did make sense in my situation.