A Homebuyer’s Guide to Temporary Rate Buydowns
Temporary Rate Buydowns are a hidden key to a lower mortgage payment! They use seller funds to lower the interest rate and payment for the first 12-36 months of a buyer’s new mortgage on a primary or second home purchase transaction. Kelly Halbrook with Platte River Mortgage shares some helpful information that we think could be useful to new home Buyers in our current market:
There are tier options of 3-2-1, 2-1, 1-1 and 1-0. These tiers affect the interest rate as below:
The more years involved, the more funds are needed to accomplish the buydown. The most popularly utilized buydown tiers are the 2-1 and the 1-1.
The buydown can result in hundreds of dollars in savings per month on the buyer’s mortgage payment. The Realtor and/or Lender on the transaction can run specific numbers for any loan amount using current interest rate pricing.
The buyer can refinance to a lower permanent rate in the meantime if market rates come down. They can also sell the home and pay off the mortgage. Any unused buydown funds are credited at pay off to the principal balance of the new loan.
This is a great vehicle for sellers as it allows them to get their home sold without affecting the sales price.
It is a great vehicle for buyers as they benefit from lower monthly payments. First-time homebuyers in particular benefit from an easier transition from renting to buying by easing into their new, full mortgage payment.
Have questions or are interested in learning more about rate options? Feel free to reach out to Kelly Halbrook of Platte River Mortgage at kelly@platterivermortgage.com.