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Do the math! Calculate the present value of each loan. Add the buy down amount to the cost of the loan with the lower interest rate. Whichever is lower wins. That said, there are some additiona...
Answer
#1: Initial revision
by
Olin Lathrop
·
2023-07-26T19:12:31Z (10 months ago)
Do the math! Calculate the present value of each loan. Add the buy down amount to the cost of the loan with the lower interest rate. Whichever is lower wins. That said, there are some additional considerations beyond the simple question you asked:<ol> <li>Can you afford the larger up-front payment? If you don't have the cash, then it's a moot point. <li>Compare to using the initial payment to reduce the size of the loan in the first place. More money down may get you a better rate. Having the bank implicitly do this for you with a "buy down" quite possibly costs more. <li>Consider whether you expect to pay off the loan early. The more the buy down payment, the longer the two loans need to run before the buy down version wins. </ol>