Missed your chance to take advantage of the government’s last real estate stimulus package? Want to learn how to optimize your buying power? Introducing the KW Stimulus. Sellers working with the HayesTeam are making their homes more attractive to buyers by offering to help buyers buy down the interest rate on their new home loan. It can make a big difference in the monthly payment, save tens of thousands of dollars in interest over the life of the loan and help you qualify for a higher priced home than you might have otherwise.
How does this work you ask? Here’s an example. Let’s say you’re buying a new home for $150,000. You go to the lender and qualify for a 5% loan. The seller is willing to pay up to 1% of the purchase price to help you buy down the interest rate on your new loan for the house. To keep the math easier we’re going to assume you’re borrowing the full purchase price of $150,000. Assuming that the buyer’s lender charges that same 1% or 1 point to buy down the buyer’s interest rate by 1% the buyer is now looking at an interest rate of 4%. This means the buyer’s monthly payment on principal and interest is now $716.12. A savings of $85/mo in payments. It also saves you over $32,000 in interest payments over the life of the loan. The only way to get this same sort of monthly payment is to give up on the $150,000 house and buy one that only costs $133,400. You can buy a house costing $16,500 more for the same monthly payment in this scenario.
Figure 1 - $150,000 Loan @ 5% Interest for 30 years fixed
Figure 2 - $150,000 Loan @ 4% Interest for 30 years fixed
Figure 3 – What you could buy for $716.12 a month without the buy down
Examples and estimates and figures are intended for estimate purposes only and no guarantees are given or implied. There is no guarantee that 1% of the purchase price will buy down the rate by 1%. Each lender and loan type is different. Check with your lender.