We are relocating out of state for my husband’s job, which requires us to sell our current house that we secured in 2020 with a 2% interest rate. Although it has appreciated in value, so have other homes, particularly in desirable areas. We’re looking at homes up to $400k, but the current interest rates are near 7%. We are considering buying points to reduce our rate. However, our lender advised against it if we plan to refinance soon. My husband is skeptical about waiting for rates to drop. Should we invest in points now to decrease our monthly payments, or hold off due to potential refinancing?
With the current high rates, it’s uncertain when they will drop. Buying points might not be beneficial if you plan to refinance soon, especially since those costs could be lost.
Galen said:
With the current high rates, it’s uncertain when they will drop. Buying points might not be beneficial if you plan to refinance soon, especially since those costs could be lost.
Our lender mentioned a program covering all refinancing fees within 1.5 years of signing. She advised that buying points now could be wasteful if we refinance before breaking even. We’re considering whether to spend $15k for four points to reduce our rate by 1%, which feels quite costly.
Consider the break-even point carefully. If you’re not sure how long you’ll stay or when you’ll refinance, buying points might limit your flexibility. Understanding your long-term plans in the new area will help decide if the upfront cost is worth the potential savings.
I recommend reconsidering the purchase of points given the uncertainty of rate changes. If the break-even point is beyond six years, you might naturally benefit from rate decreases without the upfront cost of points.