Need Advice on Refinancing – 15-Year Fixed vs. 2-1 Buydown (30-Year Conventional)

Hey everyone,

I’m looking for some guidance on my refinance options and would appreciate any insights.

Current Loan Details: Loan Type: 30-year conventional Interest Rate: 6.875% Remaining Balance: $460,000 Monthly Principal & PMI: ~$3,800 (+ taxes) Purchased: 1.5 years ago I missed the opportunity to refinance when rates dropped in September, and now I have two offers from different lenders. I’m struggling to decide which one makes the most sense.

Option 1: 15-Year Fixed at 5.5% Closing Costs: ~$4,000 (includes new escrow & prepaid taxes) Monthly Payment: ~$3,800 + taxes (same as my current payment) Pros: Shorter term means I pay off the loan much faster. More of my payment goes toward principal from the start. Lower overall interest paid over the life of the loan.

Option 2: 2-1 Buydown on a 30-Year Loan Rate Structure: 1st year: 5.625% 2nd year: 6.625% Remaining years: 7.625% Closing Costs: ~$4,000 (similar to Option 1) Lender Credit: ~$11,000 (which can be used for payments or principal reduction) Strategy: Use the lender credit to cover payments for the first 6 months. Plan to refinance again after 6 months if rates drop. Any leftover credit can go toward reducing principal. Pros: Lower payments initially, giving me flexibility. Can take advantage of a potential rate drop in the near future. Cons: Risky if rates don’t go down—after two years, I could end up at 7.625%. Uncertainty around when the best time to refinance will be. Main Dilemma: Option 1 feels safer and straightforward—I lock in a solid 5.5% for 15 years and aggressively pay down principal. Option 2 is more flexible in the short term—I reduce payments upfront and bet on refinancing soon, but there’s risk if rates don’t improve.

Would love to hear your thoughts! Would you take the safe 15-year refinance or gamble on the 2-1 buydown and refinance strategy?

Thanks in advance for any advice!