Extreme Buydown Explained

Industry Observer


The recent changes in the housing industry have had a great impact on the home selling and buying process. Among the greatest results of the changes are high-interest rates. Fortunately, you can buy down your interest rates and afford the home of your dreams.

Extreme buydowns enable sellers to find buyers for their property more easily. This means that everyone gets something from it at the end of it all. Before you decide to choose buydown as the option for easing the home buying process, it is advisable to try and understand what it entails.

What are Buydowns?

There are a number of options that can be put into use when trying to make house buying and selling easier and more affordable. Buydowns are among the best options. When you use a buydown, it simply means that you buy points that enable you to cut down on the interests on your mortgage. Sometimes, the seller of the home may meet the costs of buying the points.

Difference between Normal and Extreme Buydowns

Extreme buydowns come with more advantages than normal buydowns. While normal buydowns have proved workable, they do not always allow the buyer to afford the home at its current value. On the other hand, Extreme buydowns almost always do. The advantage of the extreme buydowns is that the seller of the home offers the buyer 3 percent of the property value to enable buying down of the interest rate. In the end, the buyer’s savings are greatly increased.

Benefits of Extreme Buydowns to Buyers

Once buyers get a high percentage to buy down the interest on the mortgage, they will be in a better position to afford the home of their dreams. In other words, they do not have to settle for a cheaper alternative. The high value of the home does not become an impediment to acquiring it. In other words, it is all about transferring the amount you save from buying down the interest rates to purchase a house whose value is higher than you could afford in the first place.

What Sellers Get from Extreme Buydowns

In many cases, sellers are left with the question on what they get from extreme buydowns especially considering that the strategy involves conceding a part of the asking price. The answer is simple: as a seller, you get to sell your house faster. Obviously, you put the home up for sale for a reason and you want to get it off your hands as soon as you can. If you are paying more than one mortgage, extreme buydowns will play a big part in easing the burden. Even more importantly, it makes the process of selling and buying a home easier by removing financial barriers.

Final Remarks

Buying and selling a home is not always easy. If you are a buyer, your income may not always allow you to acquire a house that fits your lifestyle or one you always wanted. If you are a seller, the value of the home may make it hard for you to get a buyer even when you badly want to sell it. Extreme buydowns, therefore, enable home buyers and sellers to meet half-way. They make buyers and sellers both winners in the process.



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Chris B Johnson REALTOR®
Allison James Elite - Moorpark, CA
5 Star Rated REALTOR® Quality, Not Quantity

Great information on Buy Downs, thank you for sharing Tom Evans 

Mar 03, 2019 12:55 PM #1
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Tom Evans

Real Estate Counselor and Investor
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