Buying down comes down to how long you plan on paying on the mortgage. If you sell or refinance before you recover the points you paid more than you otherwise would have. A complete analysis needs to include the effects of inflation in a long term calculation, and at that point the calculations start getting more complicated with greater uncertainty (you have to estimate what inflation is going to do at periods farther and farther into the future). Usually the uncertainty makes the longer term estimates very unstable. A small variation in the inflation estimate can completely change the results, making them more uncertain. One of the key things for calculations like this is to assess how far off things like inflation estimates have to be before the answer changes (AKA 'sensitivity analysis').

When I talked to my mortgauge broker... uh, 5 years ago for our first home - we talked about building as well and how that would work. Now, my memory from 5 years ago may not be all that reliable, but I seem to recall that the building loan would be an ARM and once the amount taken out exceeded 80% of the total loan (or was it 90% ??) We would be allowed to roll that into a 30 year fixed. Now... at the time, the 30 year fixed was a higher percentage than the ARM and mortgauge rates were near 4% in our area - and going up. Now that the economy has changed I'm sure some of the rules have changed as well. ... and let's face it. This is my recollection of a 10-minute conversation from 5 years ago. Take from it what you will.

We were in your shoes just a few months ago. Rates were super low and we were nervous about them going up. So we paid a small fee and locked in our rate for 60 days (4.875 30 year with a 1 point rebate). We were about the same position you were. What wound up happening was the builder kind of slacked off for the first few weeks and the last 2 he worked like mad. We actually got done (probably not enough for a CO, but that didn't matter since we weren't in the city limits), but the title company couldn't close us in time. It wound up working in our favor because rates had gone down and we got a 4.5 rate with the same closing costs and closed almost 3 weeks after our original target date (delay because of broker and title company, not building). As far as timeline, we poured in late March (the 22nd I believe), and we moved in July 31st. Good luck! Now you don't have to stress each morning waking up to find out what rates are doing!

Definitely shop around for rates. All the lending instituions pre internet used to publish all their rates in the Thursday paper - perhaps they still do. You could see all the rates for across the country and then compare them. I would go into the bank when it came time to renew, show them the lowest rate and tell them that is what I wanted. I got it every single time. When it came close to renewing our mortgage, we got the early renewal offer too. It's a way to prevent you from shopping around when the term is up. I just went to the RBC website and their special rate is 5.3% for 7 year term closed mortgage. Before you do anything, research all the rates. I found this (linked below) where there are many lower than what she is offering you. Play with her even though she's been good to you. Tell her that you have found better rates elsewhere and that you want the best rate matched. They don't want to lose your business and they will negotiate a better rate. Here's another link to bankrate.ca where you can check rates by province and city. http://www.bankrate.com/can/rate/mtg_home.asp?link=5 Don't settle for the offer she gave. There's room to go down. You could even negotiate a longer term so they can secure your business. Here is a link that might be useful: Canada mortgage rates