Should I Buy the Rate Down

[Danny Celestin]

BP Fam, thanks in advance for your help with this situation. I'm in escrow on a duplex, my credit score is high 750+, I'm a W2 employee, and I plan on keeping this duplex for more than 10 years. With all the speculations of rates going down in the future what is the best option in your opinion. At the lowest rate option I'll have just enough reserves. The reason I'm asking is because I made so many mistakes on my first property and I made them because I didn't ask enough questions. Just trying to avoid making the mistake this time around! Thanks again! 

1. Non QM, 8.125% interest rate, 2.625pts, 20% down payment, 12 month prepayment penalty period - 3.61% CoC

2. Conventional, 7.375%, 1.249pts, 25% DP, no prepayment penalty period - 6.45% CoC ($43K savings over 30yrs)

3. Conv., 6.999%, 1.694pts, 25% DP, no PPP - 7.2% CoC ($55k savings over 30yrs)

4. Conv., 6.625%, 2.176pts, 25% DP, no PPP - 7.9% CoC ($67K savings over 30yrs)

5. Conv., 6.125%, 3.204pts, 25% DP, no ppp - 8.72% CoC ($82K savings over 30yrs)

[Ben Zimmerman]

If it were me, I wouldn't buy down the rate.  I would get the highest APY with the lowest up front fees possible and then refinance in a year or two.  Why spend thousands of dollars in points to get the rate down to 6.1%, if the normal interest rate is 6.1% in a year and you can buy it down to 5% or 4%, etc.

Nobody knows how low rates will go, but with the fed signaling that they will likely begin rate cuts in Sept, it's certainly a good sign.  If Trump wins the election, he will undoubtedly push to get rates as low as possible as fast as possible (for better or worse).