The points made about the breakeven scenarios probably have the biggest impact on your ultimate decision.
Beyond that, what you'll have to weigh is the probability of rates going lower. If rates are going lower as they are now, then it doesn't make much sense to pay for a lower rate when you can just refi in a year. Once rates start turning around and go higher, then it makes a lot more sense to buy down as low a rate as you can.
A 2.5% rate is pretty awesome already by historical reference, but a 1.5% rate would lower your interest burden by 40%. That's pretty significant.... more
Most banks have programs that will allow you to buy points off your interest rate. Most of the time is up to 3%
However. . you should be completely sure that this money is well spent. . if you are going to stay in a house for only five years. . spending 3 points (3% of your loan amount) to reduce your payments just a few dollars every month isn't a good investment if you are not staying there for a long period of time.
Make the calculation and decide from there when is your BREAL EVEN DATE
You may be better off to ask the seller in reducing the selling price.... more