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Refinancing before temporary buydown period is over

Hi all,

Is there ever a reason choose a 2-1 over a 3-2-1 if you’re refunded the remaining balance anyways after an early refinance? When I saw early refinance I mean refinancing before the buydown period is over.

Let’s assume the seller is netting the same amount in both scenarios. Here is are two examples to illustrate my thinking

3-2-1 scenario and 20% down Offer price: $525k Seller concession of $25k to cover 3-2-1 Net to seller $500k

2-1 scenario and 20% down Offer price: $512k Seller concession of $12k to cover 2-1 Net to seller: $500k

(Seller concessions for each scenario are directionally accurate. Didn’t want to do the math to calculate cost of buydown)

Yes, the offer price is $13k higher in scenario 1 but your monthly will still be much lower. In addition, you get refunded leftover credits. One thing I haven’t wrapped my head around is at the backend when you decide to sell 5-10 years from now. Yes, you will net more in scenario 2 so it should be partially offsetting but in scenario 1 you’re recognizing that cash in the first 3 years which you can reinvest inn the market.

Lastly, 1) how is this buydown money actually refunded if you refinance early? Do they just cut you a check? 2) should covering closing costs be the most important concession you ask for before considering temporary buydown?

submitted by /u/Little_Flan7641
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source https://www.reddit.com/r/RealEstate/comments/1ckkin3/refinancing_before_temporary_buydown_period_is/

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