Answers - Real Estate

Points seem like a good idea, after all, the interest rate is lowered. But if you don't have cash on hand in advance, paying points can seem just out of re

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

ach. Do you need to pay points?

For most people, paying points just doesn't make sense.

A point, often called a discount point or origination fee, is equ

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

al to one percent of the loan amount. Points are paid to the lender at the time of closing.

By paying points, you are buying down your interest rate. The

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

ore points you pay, the lower your interest rate. Lenders started offering points in the early 1980's when mortgage rates were 15%. The housing market just

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

went dead as people were unable to afford such high interest rates on mortgages.

To stimulate business, lenders offered discounted rates with fees attach

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

d, called discount points. Many sellers began to pay the points charged by the lender in order to sell their home. This gave the buyers an affordable mortg

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

age and owners were able to get their homes off of the market.

But times have changed. Interest rates are no longer anywhere near 15% on mortgages -- they

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

are more like 7%. The need to fork out a ton of dough in order to get a lower rate isn't really there for the average home buyer.

Let's look at the numbe

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

s. For example, you find a 30 year fixed rate mortgage at 6.50% with two points. For the life of the loan, you have a fixed rate of 6.5%. But you will have

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

to pay the points at closing. If the home you want to purchase is $192,000, you will have to find an extra $3,840 at the closing to cover the points.

Ano

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

her lender is offering you a 7% interest rate on the same mortgage.

Which deal is better for you?

You put the standard 20% down on the loan. The monthly

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

payment and interest payment for the 6.5% mortgage is $1,207. The 7% monthly payment increases to $1,270 per month. That's a difference of $63 per month. I

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

f you divide the $3,840 by $63, you will find that it takes 61 months, or five years and one month, to recuperate your points in the form of a lower paymen

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

. This is your payback period.

You could put that $3,840 in the bank to earn interest. If your bank is paying three percent interest, you would earn appro

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

ximately $10 per month. If you pay the points, you are loosing money that you could have made interest on. So, subtract $10 from the $63 savings. Now divid

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

$53 into $3,840 and you will find that the payback period increases to 72 months, or six years.

So you have to stay in that home with that particular mor

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

tgage for six years to make back the money you pay in points. Most people won't stay in a home for over six years today.

And with rising home costs, many

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

home buyers don't have the extra cash on hand to pay the down payment, closing and points. That's why many lenders have started offering lower down payment

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

mortgages -- they understand how hard it is to save that money.

If the seller wants to pay points, that's great and extremely rare in today's market. If y

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

ou aren't positive that you will stay in the home long enough to recuperate the cost of your points, it would be best to choose the mortgage without points

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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Answers - The Case Against Paying Points

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