Temporary Rate Buydown

By
Mortgage and Lending with D A Griffin Financial.LLC NMLS 6380

Temporary Rate Buydown

What is a temporary rate buydown and how does it work?  

Sometimes we are in an unusual market and some tools are better than others for home buyers and sellers alike.  A temporary rate buydown is such a tool I encourage buyers to consider in today's market. 

Briefly a 2-1 buydown reduces the interest rate by 2 points the first year and 1 point the second year. The third year the rate goes to the note rate. 

A homebuyer can save a substantial amount of money on a mortgage the first year and in a market where it seems mortgage rates may go down in the future the homebuyer could have an opportunity to refinance the original mortgage to a permanent lower rate.

 

How can one pay for a temporary rate buydown?

Given the current environment a home seller can pay for the buydown on behalf of the borrower with the allowable seller concessions.   If a borrower refinances before the term is up on the temporary rate buydown the unused funds are refunded to the borrower.  In the case of a refinance in a short period, those funds can offset some of the closing costs of a refinance. 

 

Why is now a great time for a temporary rate buydown?

In some markets the higher interest rates have driven homebuyers to sit on the bench and the reduced demand has lowered home prices.  A seller would more likely negotiate a seller concession today than a few months ago.  A homebuyer would wisely consider the temporary buydown option and purchase a home today vs waiting for lower rates in the future when home prices can be higher.

A seller who perhaps missed selling at the peak of the market could offer an incentive to a homebuyer that would not have made sense a year ago. Markets change, loan programs change; an opportunity to be creative is getting the best deal for all parties should never change. Now is the time to take advantage of a temporary rate buydown. 

 

 

 

Comments (4)

Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Enjoyed your blog page, and I added you as a friend. I would love the follow back. Bill

Nov 16, 2022 10:35 AM
Dora Griffin

You got it Bill!  Have a wonderful day.

Nov 17, 2022 07:03 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Dora and thank you for the great information to share with us here in the Rain.  Make it a great Wednesday!

Nov 16, 2022 12:32 PM
Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing.  I hope you have a great day.

Nov 17, 2022 02:38 AM
Dora Griffin

Thanks, Richard.  Wishing you a great day!

Nov 17, 2022 07:03 AM
Dora Griffin
D A Griffin Financial.LLC - Fort Thomas, KY
NMLS 6380

Thanks, Will.  You as well!!!

Nov 17, 2022 07:02 AM