Very simply put, a point is equal to one percent of the mortgage amount of your loan for your Philadelphia condo or flat- be it a Rittenhouse Square condominium, or a Society Hill loft. Points are not mandatory, in most cases, and are offered by a bank in return for a lowering of your interest rate.
Let’s say you buy a $550,000 condo in Philadelphia. You are going put 5% down, so your mortgage amount is $500,000. Here is how points work:
You pay 1 point (payable to the lender), which costs you $5,000 and your interest rate is 6%
You pay 2 points, which will cost you $10,000, and your interest rate is 5.75%
Now, if you monthly mortgage payment is going to drop (say) $100 a month BECAUSE you paid a point, it will take you 50 months to recoup that $5000 investment in that one point.
You save $100 a month, and paid $5000 for that honor. Hence 50 months to recoup.
So it begs the question, are you SURE you are going to live in this Rittenhouse Square condo for over four years? Because if you are not sure how long you are going to stay put, it may not be in your best interest to pay that point. I have been a realtor in Philadelphia for almost twenty years now, and I sell a lot of condos in Center City. I don’t see a lot of folks staying put for more than four years. They get a dog, a family, a lawnmower, a promotion, a transfer, and they are off to bigger and better pastures. Empty nesters would be the exception to this general rule.
So there you have it…..for more information, check out my website www.CenterCityCondos.com and click the Vendor Menu button for mortgage solicitors who can explain more about financing a wide variety of condos in Philadelphia.
Prudential Fox and Roach REALTORS®
530 Walnut St., Suite 260 Philadelphia, PA 19106