Where do you see the mortgage interest rates after 2 years? Is it a good strategy to do 2/1 rate buy down for 30 yr fixed mortgage to reduce the cost for the first 2 years and then refinance?#mortgage
Thanks, when I buy the points instead of 2/1 rate buy down then I need to keep my mortgage 5 years to break even. Something around 5% would be good enough. My current mortgage interest rate is 7.4% with 20% down payment.
In my experience, it is beneficial to keep on refinancing over buying points. I always go with no cost mortgage and refinance as soon as I find a reasonably lower rate. Also, something to consider in the current market is going with higher down vs buydown or paying points.
I cannot increase my down payment without selling stocks and paying the capital gains taxes but yes I am considering doing additional payments to reduce my principal.
You could buy points, or you could refi if you think rates will begin to drop in that time. Definitely depends on your situation though
I have a theory to do some rough calculation. Current US national debt is about 35 trillion. Current Federal government interest payment is about 1 trillion, roughly doubled the 2020 value. If current interest rate 5.5% is kept for long. Over time, federal movement has to pay about 1.9 trillion interest every year, almost 4 times of that of 2020. Remember, US government is raising more and more money in the past few years. Suppose no more money is raised in the coming years, to keep the interest payment similar to 2020, the fed interest rate needs to drop to 5.5/4 ~= 1.6%. I don't think US government is going to pay down the national debt. Look at the interest rate in Japan. I believe it’s the future of US.
Your calculations have merit, but inflation has raised its ugly head often to crush this.
They should be in 4.5 - 5.5% range. Just run the amortization of your mortgage in Excel to figure out a break even for the points you are paying for a lower rate. Then, you can work out different scenarios of future rates. There are a lot of factors at play property price, down payment...