Points buydown vs principal reduction with seller's credit

[Ankit Rathore]

Hi, I got around 19k seller's credit for a house of 775k. I have 2 offers from lenders:

1. from private lender which allows me to buydown interest rate (I can do 1-1 buydown) and rest money will be used towards closing cost (19k - 13k). where closing cost is 13k.

2. from chase bank which allows me to use seller's credit towards closing cost and rest can go towards principal reduction. Closing cost is same 13k.

Hopefully, I will be refinancing the loan after 1 year(hoping interest rate will come down in 1 year). Both offers are very similar with respect to interest rate and closing cost. In my opinion principal reduction is the best option instead of buying interest rate since money will not go directly towards principal. What do you all suggest?

[Elias Halvorson]

It depends on your personal preference. I liked buydowns for folks who needed/wanted the lower monthly payments. In an environment where rates are decreasing you could temporarily get a larger reduction in monthly payments and (hopefully) be able to refinance at a lower, permanent rate sometime in the future. However, if you don’t have an issue making the monthly payments without the buydown then probably just Stick to getting your closing costs covered.