Can I lower my rate?

Question

Bought a house with an FHA loan, if I bought down the interest rate, do I need to wait longer for rates to drop and refinance than others that did not buy down the rate?

Alex Maclagan · Answer

@Matthew Mclean I would not recommend buying down the interest rate when rates are going to fall. The points you pay at closing do not get refunded to you when you refinance. The way I advise my borrower's is to take the savings on your monthly mortgage payment and divide it by the cost to buy down the rate. That is how many month's it will take to break even. Every month after that you will realize a profit.

I would save the money for when you refinance to buy down your interest rate even more since you will have the refinanced loan longer than the loan with your purchase.

Alecia Loveless · Answer

@Matthew Mclean May not apply to your loan but for others that read this they may need to make sure there is no pre-payment penalty. If there is one you would need to take into consideration the effects of the costs associated with that vs. your new savings via the lower interest rate.

Erik Estrada · Answer

It highly depends on how much you bough down the rate and where market rates at par will be in the future. No one can predict where the rates will be in the future, but if it is a significant buy down, it could take a while for market rates to catch up.

Derek Brickley · Answer

Hey Matthew, generically yes.  If you bought down the rate it would take longer for the market to improve enough to make refinancing worth it for you.  Hard to know exactly for you depends on a number of factors.

Craig Warner · Answer

Hi Matthew,

Hard to tell without knowing your current rate and more of the overall scenario.

Thanks

Craig

Ned Carey · Answer

@Matthew Mclean Generally yes presuming your goal is to get a better rate. You bring up a disadvantage of buying down rates I hadn’t considered before.

The fact you bought down rates on your last mortgage has no affect on a new mortgage, even if it is from the same lender.