Basics
The more you pay a creditor before the loan payment discount is the interest rate lower.
This may make sense for borrowers who want to make an interest rate very low for a long time.
If you plan to retain ownership and make a loan for a very long time, this way. You pay in advance for the right to pay less over time.
Refinancing
Often this type of payment is made in a refinancing. The borrower of these charges> Loans Close special fee as part of their cost. These are some of the equity in the property as payment to lower interest rate. In this way, the current monthly payments the borrower will be lower. This is a cash flow management tools.
Time Frame
Note that many borrowers do not keep their guides for a long time, although long-term plan on keeping the property. Borrowers often refinance their loans to reduce their monthly payments by cash orequity, or both. This is usually an option for many owners, because the value of a property increases over time. It may be a temptation, as increasing the value and equity will be available.
If that is right for you?
You can see some quick calculations, if that makes sense for you.
Your savings in time should be more than the cost in advance payment with a lower interest rate and monthly payment.
The other way is to see things, that some of your shares in aRefinancing in exchange for a smaller payment than would otherwise be possible.
In an environment of increasing interest rate this is a way to get a better interest rate.
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