Rate buy down/payoff and $2000 refinance Credit

[Dylan Wickersham]

I'm getting a seller credit at closing for $8000. My Mortgage broker at Ruoff says I should use $4500 for closing costs and 3500 for rate buy down (3900 gets me to 6.25%). This saves me approximately $100 per month (39 month payoff). Ruoff has a credit for $2000 towards a refinance within 4 years (48 months). Does anyone think that Rates will drop sooner than 39 months by 1% or more?

[Zach Wain]

@Dylan Wickersham - the majority of economists believe rates will drop in the next year or two.  Right now, it is challenging to offer good deals that have no discount points.  Rate sheets are structured in a challenging way right now, so there is a lure to have discount points.

I can not speak for that individual mortgage company, but for the majority of mortgage companies that advertise a "no cost" refi in the future, its BS.  When rate sheets normalize, its super common for all lenders to offer no cost refi options.  Its nothing special, you just raise the interest rate 0.25% and cover the closing costs.

Maybe this company is truly going to give a $2k larger lender credit than you would get otherwise, but how would you know that are going to do that?  Your buddy may call the same day to refi that you do and you get the same exact deal that you will get.

Rate structuring is tough right now, look at 2-3 different options they present you with and do the best you can.  I bet $1,000 that you will be refinancing in under 2 years, but that is just my guess.