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What Is a Mortgage Rate Buy-Down?

As rates get higher, more homeowners are buying down their interest rates. Curious about what that means and if it’s right for you? Here’s the rundown on mortgage rate buydowns:

– A mortgage buydown is a way to lower your interest rate by paying discount points at closing. Discount points are a one-time, upfront fee.

– Each point costs 1 percent of the mortgage. For example, one point on a $200,000 mortgage would cost $2,000.

– Each point lowers the rate by 0.25 percent. So, one point would lower a mortgage rate from 6 percent to 5.75 percent for the life of the loan.

If you’ve got some extra savings and can afford it, buying mortgage points may be a smart investment. Even better… more often than not in the current market, you can get the SELLER of the home you’re buying to buy down your rate for you!

Many lenders are offering other programs such as 2-1 and 3-2-1 rate buy-downs as well where you get a lower interest rate for the first 2-3 years of the loan. Many sellers are offering to pay for these buy-downs as incentives for you to purchase their home. If you’d like to discuss whether this would be a good option for you or not, feel free to reach out!

Have more questions about buying a home, taking out a mortgage, or other creative financing options available? Click the button below – I’d love to help!

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