How to get a Lower Mortgage Rate
Take On High Rates with a Buydown
If you're looking to buy a home, you'll want to use all available savings, especially if mortgage rates are high. Two popular options are temporary and permanent buydowns. Both lower your initial loan's interest rate in exchange for a lump sum payment. This payment can be made by you, your home's seller or builder, or lender.
Consult your real estate agent to best use this option.
Here's more about each type of buydown.
Temporary buydowns are designed to assist buyers during their first one to three years of home ownership. Here are the most common buydowns:
A 1-0 buydown reduces the loan's interest rate by 1% for the first year of its term before it reverts to its original rate.
A 2-1 buydown reduces the buyer's rate by 2% during the first 12 months and 1% during the second year before reverting to the loan's original rate.
The 3-2-1 buydown works like the previous two options, reducing the interest rate by 3% in the first year, 2% in the second year, and 1% in the third year.
Any of these will benefit your cash flow, especially if you'll need to purchase appliances and furniture for your new home.
Another option: permanent buydowns. These come in the form of discount points, which are up-front fees paid in exchange for a permanently lower interest rate. One point typically equals 1% of the loan amount. A discount point can represent a rate reduction of up to 0.25%, depending on the offer.
Do the math! See what works best for you and your home buying situation. The ideal plan is to save money and re-finance when rates are lower.
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Karen Martin Realtor 774-930-8181 More About Karen
Safe Harbor Realty 1037 Main Rd. Wetstport, MA 02790
Helping Home buyers and Home sellers in MA and RI since 2003.