With rising interest rates, buyers and sellers can come together for a unique win-win with a temporary rate buy-down. Unlike purchasing points that lower an interest rate by a small amount (typically 0.125% - 0.5%) for the life of the loan, a temporary buydown lowers the rate much more significantly (up to 3%) at the beginning of the loan. This unique financing option can help buyers ease into the full mortgage payment and provide a unique value-add for sellers. It’s also an answer to buyer’s that still want to wait until “rates drop”.
At Key Mortgage, we offer several options for a temporary buydown that include: 3/2/1, 2/1 and 1/0. For a 3/2/1, the 1st year rate is 3% below, 2nd year is 2% below, 3rd year is 1% below, 4th-remaining term is the note rate. Here is an example of a 2/1 buydown if the buyer’s rate is 7%.
1st year rate: 5.000%
2nd year rate: 6.000%
3rd-30 year rate: 7.000%
Temporary buydowns can not be funded by the buyer so this is an excellent tool for sellers to make their property more attractive without having to lower the list price of the home.
For more information on how to work with your sellers to market a temporary buydown or to help your buyers negotiate this financing when purchasing a home, reach out to me to be connected to a Key Mortgage Loan Officer.
