Here is my options from lender posted below. I plan to keep this home, and won't consider moving out in less than 2 years. Should I buy down the rate? Right now I have been offered 4.00 rate with $1683 in costs. Property value is 325000, loan balance is 162000 and adjusting upwards over the last several months. now at 4.99 and moving upward being tied to the treasury index. Thanks in advance for any input.
EMAIL FROM LENDER:
If you are set on the lowest rate possible it does come with a higher cost. For 3.5% interest it comes with another $4,000 or
3.75% at $1300 more in cost or
3.875% at $700 more in cost.
This all boils down to how long you plan on living at the property and having that mortgage. Each of the options (4, 3.75, 3.875) have a break even point on how long you need to have that mortgage.
$4,000 for 3.5% saves you $810 a year... break even 4.94 years
$1,300 for 3.75% saves you $405 a year... break even 3.21 years
$700 for 3.875% saves you $202.50 a year... break even 3.46 years
Also.. it sounds like you are talking about a variable rate...
"adjusting upwards over the last several months. now at 4.99 and moving upward being tied to the treasury index"
If that is the case you should check into what the cap is on the interest rate... or just get a fixed rate loan if you plan on having the mortgage for a while.
Hey Jon Reed
Current loan is adjusting and now at 4.99. I am being quoted a 30 year fixed rate. Probably will be living in this home for several years, or moving out and renting it out. So, I think buying down the rate makes sense.