Strategy on buying points

[Eric Braxton]

Hi, I would like to see what others strategies are when buying points to lower a mortgage rate.

I know that buying points will lower the mortgage and create or provide a bigger cushion to cash flow. But how does everyone determine that sweet spot between a lower payment and more cash up front? Is there a certain break even point on the savings that you shoot for?

[Riaz Gillani]

I don't do it unless I have to in order to cash flow. And it's not because I think rates will go down in the near future. Just a little bit too much global uncertainty for my liking to lock up additional liquidity. Risk of recession in Europe and here at home, inflation, war in Ukraine, market conditions + Covid regulations in China ... mid-term elections on the horizon. But I'm also a stickler for time value of money. Admittedly to a fault.

For most I think the 'sweet' spot is buying down a quarter or whatever number of bps that can be recouped within or shortly after 5 years. Those people being risk-averse, casual RE people that would have otherwise had the money in a low yield savings account.