Buyout point to reduce rates

Bay Area
1

I’m debating to go for lower rate with point vs higher rate without point. On paper option 1 makes more sense as it saves me $170/month so break-even period will be 5 1/2 years. We are planning to stay in current property longer than that unless there is any unforeseen reason.

Is there any reason to not pay down point ? 2.5% for jumbo loan seems too good to pass, If rates further fall in future, it may not make sense to re-fi again.

Option 1:
Rate 2.5%
Closing cost 11K (Including point)
11K will be added to loan amount.
Monthly payment: 4433

Option 2:
Rate 2.875%
Closing cost covered by lender
Monthly payment: 4605

2

My friend locked at loan depot (730k loan home of 1.2M) with 2.375% with $2000 one time fee as point. This is 30 year fixed, he locked yesterday.

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3

Thanks Jill, My loan amount is higher hence not qualified for conforming loan. Lot of the lenders are currently not re-financing jumbo loan. I’m seeing better rates for loan less than 750K amount.

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4

In general, I don’t buy points if I think rates are going down and will re-finance 2-3 years later.

5

How low could it get, 2.5 seems really low but year ago I thought 3.125 was low as well :slight_smile:

6

Refinance when it makes sense to you.
I did 3 months ago at 2.8 that I thought the lowest :slight_smile: I am happy with it.
No one really know how low it gets but for sure rate will stay low next couple years according to the Fed.

7

There is a break even point. For my friend, they said 2.5% with no point or 2.375% with $2000 as point. With this he was telling some break-even happens 12 months. If he is not refinancing for 12 months, he is fine.

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8

Conforming limits are rising into the 822k range in about 3 weeks. Might be worth waiting.

You have to break even in 2 yrs or less. Anything longer is throwing $$$ away.

Thanks for reading

LbJW

5 Likes
10
  • Do you know what the total net costs (total of points+appraisal+application/lender_fees -discount/cashback_if_any etc) are?
  • Does the borrower need to establish an escrow account through the mortgage company to get this rate?
11

I do not have full details. However, he locked it with 2.375% for 30 year fixed.