Interest Rate Buydowns

Interest Rate Buydowns 

Interest rate buydowns for home loans are coming back into focus. 

What are the benefits of an interest rate buydown and who is the best candidate?

In general the best candidate for an interest rate buydown would be someone who is expecting to have a greater income in a couple of years. A buydown allows the home buyer to ease into a higher rate (payment) in year #2 and #3. 

Another candidate would be someone who perhaps sees the home as a short term investment if he/she moves or transfers often. 

In light of rising home prices and interest rates, a buydown can help those with budget concerns initially.  Think about someone who is paying off student loans or an auto payment which would be paid off in 2 years. 

Each home loan situation is different so there are different reasons one may select a buydown of a long term interest rate. What is important to know is that it is something lenders are offering again and it is not for everyone, and it comes at an additional cost, and not all lenders are offering it. 

Interest rate buydowns are just another tool in the toolbox when I listen to home buyers and their goals.