I’m a first time home buyer and I have a few decisions to make before Closing. I managed to negotiate a decent offer from the cheapest lender, bringing my rate to around 6.5%. I also have Seller’s concessions of about 21k that could help lower my rate with a buydown to 5.875%. From what I understand, this would reduce my monthly mortgage by around $293, which means a breakeven time of about 72 months. Should I go for that, consider a 2-to-1 buydown, or just use the 21k for Closing costs? I don’t plan to ever sell the house, but refinancing seems like a good option down the line with my bank. Any thoughts would be super helpful.
I wouldn’t do a 2-1 buydown. It’s worth checking how long you have for a free refinance since it’s usually 2-3 years. Saving $300 a month is pretty substantial, but I’m guessing your total monthly payment is around $700K? It might be better to keep the extra 21k as an emergency fund. I’d hold onto that cash and plan to refinance when rates drop below 5.8%, which might take a while.
@Teo
That makes sense. I didn’t think about keeping the cash for emergencies. How long do you think it would take for rates to drop that low?
Ari said:
@Teo
That makes sense. I didn’t think about keeping the cash for emergencies. How long do you think it would take for rates to drop that low?
Honestly, it’s tough to say. Rates fluctuate a lot based on the market. Just keep an eye on economic news and trends. It could be a year or two before we see a significant drop.
I’d say go for the buydown. Lowering your rate even a little can save you a lot in the long run. Plus, $293 a month is a nice chunk of change.
Palmer said:
I’d say go for the buydown. Lowering your rate even a little can save you a lot in the long run. Plus, $293 a month is a nice chunk of change.
I see that perspective. But what if I need that cash for other expenses down the line? I’m worried about being house poor.
@Reese
Totally get that. It’s all about finding the right balance. Just make sure to consider your overall budget before deciding. You want to be comfortable in your new place.
If you don’t plan to sell, the buydown could be beneficial. But also consider the long-term costs of refinancing. Might save a lot more in the end.
Presley said:
If you don’t plan to sell, the buydown could be beneficial. But also consider the long-term costs of refinancing. Might save a lot more in the end.
That’s a good point. I’m just trying to weigh all my options here. I really appreciate everyone’s input.
I had a similar situation and went with a buydown. It worked out for me, but just make sure you’ve got a solid plan if rates don’t drop as expected.
Mackenzie said:
I had a similar situation and went with a buydown. It worked out for me, but just make sure you’ve got a solid plan if rates don’t drop as expected.
Thanks for sharing your experience. It really helps to hear how others handled it.