Mortgage Advice - Buy Down Rate?

[Marble]

I can buy down my mortgage rate from 2.875% for the following amounts:

2.375% would cost $13,276.80 in a fee
2.50% would cost $9,513.60 in a fee
2.75% would cost $3,840

I'm debating whether or not this is worth doing. It would take a little under 7 years to break even on the payment amount difference adding up to $10k. I don't plan on moving, ever, let alone within 7 years. After that we would save us about $45k in interest over 30 years.

The other side of the coin is that I could take the said $10K and put it into investments (my 401k) and make, say 8% interest on that money, and in the long run be better off than I would be in saving the $45k interest.

What say ye?

Thanks!

Choose differently and do a 15 year.

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[Clearedhot1]

Couple great Ramsey Show clips on YouTube explaining it all, especially the break even point. If you plan on staying 10+ years, it could be worth it. We were just faced with the same debacle and opted on NOT buying points. As others have said, the 15 yr option is great or doing a 30 and setting up biweekly payments. Addntl principal is a great idea.


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[dtrkyman]

Not sure about the buy down rates, but a friend of mine who owns a bank always told me take the longer term mortgage and pay additional against the principle every month, just takes some discipline and of course having the extra money!

Plus if you get in a financial bind you are on the hook for a lower monthly payment!

 

[Wildfire1550]

Have your mortgage guy figure the break even of paying the points or using that same money to pay down principal. Break even is usually around 44 months

 

[def90]

I can buy down my mortgage rate from 2.875% for the following amounts:

2.375% would cost $13,276.80 in a fee
2.50% would cost $9,513.60 in a fee
2.75% would cost $3,840

I'm debating whether or not this is worth doing. It would take a little under 7 years to break even on the payment amount difference adding up to $10k. I don't plan on moving, ever, let alone within 7 years. After that we would save us about $45k in interest over 30 years.

The other side of the coin is that I could take the said $10K and put it into investments (my 401k) and make, say 8% interest on that money, and in the long run be better off than I would be in saving the $45k interest.

What say ye?

Thanks!

If you are paying a $13k fee just put an extra payment or two on the principle every year and you will probably save more in interest and pay off earlier than with the refi and big payment.

 

[Trial153]

Never in my life have seen seen debt cheaper and ROI higher.

Just me, in this environment I would keep as much on my own money a could and keep it working for me. Use the increased ROI for positive cash flow and pay down debt with some of the increased gains

 

[String&stick]

Man. . . Not even one year gone by and 2.875% looks amazing!!! Sitting at about 5.4 for current 30 year mortgage rates today

 

[rickjames80]

Man. . . Not even one year gone by and 2.875% looks amazing!!! Sitting at about 5.4 for current 30 year mortgage rates today

That is just crazy to think about

 

[thinhorn_AK]

How does it change the pay off of your house if you take the $10k and put it directly against your principal amount of your mortgage

This right here.

 

[thinhorn_AK]

Just looked at my mortgage statement today, we locked in at 2.09 on our 15yr.

 

[thinhorn_AK]

Dont buy points. Just take a 15yr instead. Invest the extra money and you will always have a buffer.

These point buying things are ****** up dirty tricks. Pay that 10k straight to the principal.

 

[MattB]

I wouldn’t buy down personally.

 

[String&stick]

That is just crazy to think about

Yea,
I'm technically a mortgage loan officer (I avoid doing them like the plague because I'd rather be doing all of my other roles in the bank). So I get daily rate updates. It's been crazy to watch things go from low 3% range in December to mid 5's here in April. Gonna get really interesting to see what happens if the fed bumps .5% in May.

 

[roadrunner]

Instead of buying down you should drop to a 20 or 15 year loan and get those rates. Your payment might increase slightly but you will save way more slashing years on your loan.

This.

 

[RyanT26]

Yea,
I'm technically a mortgage loan officer (I avoid doing them like the plague because I'd rather be doing all of my other roles in the bank). So I get daily rate updates. It's been crazy to watch things go from low 3% range in December to mid 5's here in April. Gonna get really interesting to see what happens if the fed bumps .5% in May.

I was reading something the other day that was stating In their opinion the 30 year interest rate on a home loan get hit 7% by the end of the year do you think that’s possible?

 

[String&stick]

I was reading something the other day that was stating In their opinion the 30 year interest rate on a home loan get hit 7% by the end of the year do you think that’s possible?

In my purely well known rockslider capacity, and not in any legal sense my mortgage loan officer capacity. . .

If they don't slow down we will be there by summer. Rates have been on a steep incline. Hopefully pricing in the feds nest move. But if the fed plans to hike another 1.75% this year we are going to shove mortgage rates up pretty hard.

Now that said, were already starting to see people balk at 5.5% rate quotes. On the front end of a rate hike you see lots of activity as buyers rush to buy something and lock in their pretty good rate. Those people locked in last month or the month before and are starting to close their deals. New quotes are scaring people a bit and pushing down buying power. If we tack another 1.5% on it's going to really slow down buying and what people can afford.

We're also going to be slowing down other buying. . . You want to pay 6% on that new pickup? How about 8-9% lines of credit for farmers or construction companies?

We need to get a handle on inflation but I see a good chance for the fed to jerk the wheel into the opposite ditch and bang up the economy pretty good.

So yes I could see 7% mortgage rates, but if we go there we're going to be slamming the breaks on a big part of our economy. People paid 12% In the 80's but they weren't buying $400,000 homes either. People can't afford that kind of interest on today's house prices , so something will have to give!

 

[dukxdog]

Go for the 15 year if you plan on staying that long.

I paid extra principal payment money every chance I could. I paid my house off 3 years early. Feels great to have NO DEBT!

 

[Yoder]

When I refinanced, went from 22 years left on a 30 year and took out a 15 year loan. Payment was $50 more a month and it knocked 7 years off my loan. By doing that and making extra payments I'm on schedule to pay off my house in 20 total years instead of 30.

 

[go_deep]

I can't remember which retired feed chair is was, but a few months ago I read an article he stated that interest rates should match inflation rates.
See we should be seeing 7+% right now.

 

[fwafwow]

@treillw - what did you choose? Hopefully not Dogecoin.