Cost to buy down the interest rate

[Denise Johnson]

I am considering loan options and want to consider buying down the loan rate.  Went would it NOT make sense to buy down the interest rate?

[Jay Hurst]

@Denise Johnson    The cost and benefit is going to depend on a lot of factors including property type, occupancy, credit scores, loan to value, loan program. But, yes, buying down it today's rate environment can make a lot of sense. For example, on a single family non-owner occupied assuming good credit, 500k purchase price with 25% down in Oregon. 

(With us at least) A 30 year fixed rate would be 6.99% with no buy down for a payment of 2494.  Buying down 1% of the loan amount or 3750 would get your rate down to 6.375% with a payment of 2339.    So, the monthly savings is 155 a month. So, the "pay back" of your 3750 additional upfront with the 155 lower monthly payment is 24 months. (3750/155= 24.19)   So, in the above case, IF you are pretty darn sure you will own the house for at least 24 months the buy down would make sense.