What is the purchase?
Break disconnector concerns the reduction of the interest rate of the loan. This reduction is often compensated by a payment made when the loan is discarded, either the debtor or the creditor. This payment, if the buyer is made, is known as the purchase of discount points.
The discount point, also known as the originator or simply point , is the fee paid at the time of the loan. One discount point corresponds to one percent of the loan amount. Buying one point can reduce the interest rate by approximately 0.125% per loan period if it is permanent denying.
However, most of the purchase is temporary. Reducing the rate is only applicable in the first few years. 2/1 forgiveness concerns the reduction of the interest rate in the first two years of the loan. If the reduced rate is applicable for three years, it is known as waste 3/2/1 .
For example, if the interest rate for a loan is 9%, with a purchase of 3/2/1, the rate for The first year is 6%, for next year it is 7%and for the third year it is 8%. Subsequently until pThe vacuum will end for three years, the rate could return to 9%. The turns are available in various forms.
There are many reasons why people can choose the possibility of buying. One of them is financial problems. Loan payments are gradually increasing when the purchase is in force. Another reason is to expand the loan for which the debtor could be included, because the initial monthly payments would be lower. This, of course, depends entirely on whether the creditor factor in determining the size of the loan in the purchase ratio.
Tax reduction is also possible due to waste. By paying the discount points for the purchase of the loan, the debtor can obtain a tax deduction for the tax year. Lower interest rate in the coming years, while reducing tax benefits, results in lower monthly payments.
Breaks are not only beneficial for debtors, but also for creditors. DESTRIANSS are offered in the construction industrySHE or permanently, with a reduced interest rate for the entire duration of the loan to encourage people to buy more real estate. In such cases, the creditor pays discount points.
Forgiveness is often used for mortgage loans. When considering whether to obtain permanent purchase, the debtor should calculate when its savings from a reduced rate would be equivalent to discount points. Whether or not the waste is completely dependent on who buys discount points.