Only Stupid Homebuyers make this Mistake [Don't Do This!] - WSJ's Home Buying Bad Advice.

ah the good old Wall Street Journal bad

advice for home buyers here and you

should know it in fact this is a mistake

if you're a home buyer hate to say it a

lot of people make all the time yet

almost nobody talks about this obvious

thing that you could do to save

potentially a lot of money over the long

term let's talk about this we'll also

balance it obviously with the risks and

we'll give the Wall Street Journal

credit where credits do but first let's

make this very clear the Wall Street

Journal runs an article on tips for how

to get a 6% mortgage and their argument

use points buyers can use Mortgage

points to lower their interest rate if

getting to 6% or under 6% is important

to them each point reflects 1% of the

loan amount and might be paid upfront to

your lender one point on a $300,000 loan

would cost

$33,000 each point lowers your interest

rate by about a quarter of a percentage

point for the life of your your loan so

initially that might sound like a good

advice wait a minute I can pay a little

bit of money now to have a lower

interest rate forever H that could be a

good investment right we could argue for

hey I'd rather pay a little bit more now

and then save money over 30 years right

because those are a lot of payments

that's usually the way lenders like to

sell the idea of points the idea of

selling points is very simple it makes

people feel like they got a better deal

even though they're paying for it the

reality is they're probably making a

massive mistake first let's understand

the game a little bit okay when you go

get a quote from A lender let's say the

quote is

7% usually you'll get or you can ask for

what's known as the zero point rate it's

basically what's the best interest rate

right now now if you want to pay points

you might be able to get a lower

interest rate for example if we want to

get down to 6% maybe we have to pay Four

Points just like the Wall Street Journal

suggests or maybe you want to pay two

points and you want to get to about 65%

or one point to get to

6.75 the point for the lender is it's

more desirable to sell a 7% loan so they

don't have to charge you anything

because they can go to the market and go

I got 7% who wants it if you want a

lower rate they'll give it to you

they'll just charge you for that debt so

they'll charge you a couple points and

rather than getting paid by the market

they're getting paid by you for a

portion of that loan so basically make

that payment up front and you're

compensating the lender for giving you a

lower rate that's great everybody always

talks about getting a lower rate this

way just like the Waller Journal but

they're making a fatal mistake they're

totally forgetting that you could

actually go in the opposite direction

and why might that be beneficial well

let's think that through for a moment

what if I could get -2 points for a 7

and 1 12% loan or what if I get -4

points for an 8% loan whoa whoa whoa why

would I want to go up an interest rate

oh because you're getting money negative

points would mean you are getting money

now there's a limit to how much money

you can get the limit is what your

closing costs are but let's say your

closing costs on a deal or

$116,000 and you're buying a

$400,000 property well Four Points times

$4,000 1% of a $400,000 loan would be 16

Grand you'd basically have no closing

costs so all the money you would have

taken out of your pocket to pay for

closing costs you're not paying now

that's interesting if somebody then

comes to you and says hey would you like

to pay a higher interest rate for a

little bit of time but have $16,000 more

dollars in your pocket well you might

say well how long that is the magic see

the magic you've got to consider is are

you going to refinance this loan most

people refinance their loan with normal

interest rates every seven

years but interest rates are expected to

plummet very soon as the Federal Reserve

starts cutting interest rates so

basically anybody who gets a home loan

now is probably going to want to

refinance within the next few years

assuming they can now that's a danger

anytime you assume you can refinance and

you don't consider the potential for job

loss or you're income going down or

whatever there is a risk that you get

stuck with that loan but if you're

comfortable with that risk I think most

of us would argue yeah I mean look if

rates right now are 7% or whatever Plus

or midus we'll probably refinance as

rates come down great if that's your

point of view you should not pay points

you should take negative points so let's

consider two options at a time here for

a moment let's say your lender goes to

you and says hey you could get a

$400,000 loan at 7% or 400 at 6% you

might say oh well of course I want the

6% but then they say hey but that's

going to cost you four points or

$116,000 well you better have that darn

loan for at least 5 years because it's

going to take you about 5 years to break

even on just having paid

$116,000 just to save

$263 per month the stupidest thing you

could do would be to pay all of these

points and then refinance after one two

three or four years because you've then

literally lost money bad investment

decision you'd be better off taking the

zero point

loan but you could be even more extreme

if you think you're going to refinance

you could jump over to the negative

Point side take the 8% rate assuming you

qualify which is going to cost you $274

more per month about

$3,288 per year but wait a minute the

difference between 6% and 8% is actually

16,000 that you're not paying plus

another 16 which means the difference

between the 6 and 8% is 32 ,000 in fees

you could literally pay

$32,000 in fees for roughly 10 years if

you look at that annual difference 10

years so you literally have 10 years to

refinance if you go for the negative

option versus the positive if you

compare it in that direction right

usually I don't like to compare it that

way I generally like to say if you're

going to take negative points it's

because you think you're going to

refinance within the next 5 years usual

rule of thumb you're going to refinance

you could even say if you want to

include opportunity cost call at 7 and a

half years because you have more cash in

your pocket today right cash today is

more valuable in the future so I usually

say rule of thumb 5 to 7 and a half

years if you're going to refinance

always go negative now this is not

personalized Financial advice for you

I'm a real estate broker I'm also a

licensed financial adviser is just a way

to wake people up to this now the other

items they in here look they do make an

argument here oops wrong side over here

they do say boost your credit score yes

boosting your credit score will help you

get your rate down usually the best

score is 740 above 740 it doesn't make

much of a difference anymore finding a

discount on a home yes great idea but

they don't actually talk about finding a

discount on a home they're talking about

shopping lenders to find a discount on

the actual loan fine yes you could do

that as well you just have to be careful

sometimes the cheapest lenders have the

poorest service in actually getting your

loan done now maybe that's not a big

deal because maybe you're an easy

borrower who's an easy borrower W2 you

get a paycheck every week or two weeks

and you got like no debt easy the

hardest borrowers self-employed run

businesses multiple tax returns crazy

writeoffs crazy debts whatever the more

in that direction you are the more you

probably want a really good lender handh

holding you through this because it's

kind of hard to get approved for a loan

these

days then of course yes you could get a

discount on a house now I do want to

give a fairness here to the Wall Street

Journal they do say think about whether

you will refinance in the next 5 years

if you're considering buying points they

say that but they literally don't say

why they don't say why and that's the

big mistake not only do they not tell

you why which I just explained they also

don't tell you that you could go

negative so I don't understand what it

is with people's problem but nobody ever

thinks about taking negative points and

that is a substantial mistake that

people made you want to learn more go to

meetkevin.com and you can check out my

videos on how to actually get a good

deal in real estate can potentially save

you tens to hundreds of thousands of

dollars a lot of people have followed

the same steps go to meetkevin.com check

out the zero millionaire real estate

investing course but yes boost credit

get a discount on the home shop the loan

but be careful it's not worth losing a

deal because your lender sucks cuz

you're using some you know random broker

that uh doesn't have a local reputation

to protect and then consider negative

points but just be careful if you can't

refinance in the future you get stuck

with that higher rate thanks so much for

watching if you like this consider

subscribing and see you in the next one

why not advertise these things that you

told us here I feel like nobody else

knows about this we'll we'll try a

little advertising and see how it goes

congratulations man you have done so

much people love you people look up to

you Kevin pafra there financial analyst

and YouTuber meet Kevin always great to

get your take even though I'm a licensed

financial adviser real estate broker and

becoming a stock broker this video is

neither personalized Financial advice

nor real estate advice for you it is not

tax legal or otherwise personalized

advice tailor to you this video provides

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potentially including those mentioned in

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maker