Lower Your Interest Rate and Save on Your Mortgage

Buying a home can be expensive. You can lower your mortgage payment with a rate buydown. In this blog, we explain what rate buydowns are and how they work.

What Is a Rate Buydown?

A rate buydown lets you pay extra upfront to lower your mortgage rate. You pay additional money at closing, often called “points.” Each point lowers your rate by a fixed amount. For example, one point may reduce your rate by 0.25%. This saving lowers your monthly payments.

Types of Rate Buydowns

There are two main types of rate buydowns: temporary and permanent.

• Temporary Buydown:
  This option keeps your rate low for a few years. After that period, your rate resets to its original level. You enjoy lower payments early on.
• Permanent Buydown:
  This option lowers your rate for the life of your loan. You pay more upfront. Then you benefit from a lower rate and lower monthly payments.

How Do Rate Buydowns Work?

You pay extra money at closing, usually in points. Each point reduces your interest rate by a set amount. As a result, your monthly payments drop. You save money every month. A mortgage lender can walk you through all your options though so that you are well informed. The actual cost of the points and the rates vary depending on the market and a buyers qualifications.

Benefits of Rate Buydowns

Rate buydowns offer clear benefits. They lower your monthly payment and improve your cash flow. A lower rate can boost your purchasing power. You may qualify for a larger loan and can afford your dream home more easily. For many, the rate buy down was the only way for them to afford a home!

Market Perks: Let the Seller Pay

In today’s market, I have negotiated seller credits for almost all my buyers over the last three years. If the seller provides a credit, you can use this to help pay for the cost of buying down the rate. Moreover, some builders offer to pay for rate buydowns. I know of builders offering rates as low as 4.5%. I can help you negotiate these perks or introduce you to builders with these incentives!

Bottom Line

Rate buydowns can lower your monthly mortgage payments and save you money. They come in both temporary and permanent forms. In today’s market, sellers and builders often help reduce your costs. If you need help with your rate buydown, let’s connect. I can guide you to the best option for your financial goals.