About to Close - Could Use Some Expert Advice

[Jeremy Dory]

We are two weeks from closing on our first investment / rental property in Denver. The interest rate of 4.3 at 15 years was locked in a few days before fed dropped interest rates 50 points. Looks like they are going to go to zero, so another 100 points this month. Thats 1.5% drop after we locked in... I want some of that 1.5%! Our credit is nearly perfect (~800) with both wife and I on the loan. If we walk away we lose our 5k deposit, but almost seems worth it to me as 1.5% is significant.

What would the seasoned professionals here do, what are our options? 

The house is new construction and we are going with the developer's lender due to $15k incentive. House (SFH) is $335k 2/2, a small ranch. A relatively good deal for Denver market. TIA!

[Patricia Steiner]

Do the math...the difference in payment amount between what you locked in at and a rate of 3.5% is $154 monthly or $1848 annually.  The builder is providing $15000 towards closing costs. That closing cost assistance alone would take you more than 8 years to achieve in the interest reduction alone if you walked from the deal.  And, that's not including the loss of your escrow deposit.

My recommendation is to close as you've committed, know you received $15k in closing cost assistance, and while your rate is higher - you're 8 years ahead of the interest rate curve on that alone.  You can refinance later so again - DO THE MATH.  Interest paid is also tax deductible so in the end, losing $5k in escrow and $15k in closing cost assistance doesn't make sense to get a 1 to 1.5% interest rate reduction.  

Congrats on your soon-to-be new castle.  Hope this helps.