Can You Buy Down Your Interest Rate – Want to make your monthly payments cheaper as interest rates rise? Consider shopping to reduce your interest!
“Market Update: Why Now Is a Great Time to Buy and Sell!” As mentioned in our previous article titled, Now is a great time to buy and sell.
Can You Buy Down Your Interest Rate
A few years ago, we saw interest rates at historic lows, and now they’re rising, and naturally, our buyers have reservations – and we get it! If you’re paying for your home in cash, the interest rate won’t affect your decision, but if you’re looking for financing, it may influence your decision. Just know, if you have good credit and some cash, you have options! One of these options is to lower your rate temporarily or permanently.
How Much Does It Cost To Temporarily Buy Down A Mortgage Interest Rate?
Toby Lane, Managing Director of New American Funding, Atlanta, GA, gives us the following information about the buying process and how it can help you.
“A buy-down is where we lower the rate and then lower the monthly payment, going back to the value of the loan note that was left before the rate changed for a certain amount of time and putting it in a trust account. Pay us the lender to make up the difference.
The monthly payment reflects the value of time, so the payment is lower in the first year, two years, or three years depending on the purchase period than the remaining years of the loan. We also need to write down the cash difference for the years of purchase.
For example, 1-0 will have a 1% price reduction for the first year only, and then the customer will have their regular price for years 2-30. When buying 2-1, the buyer pays 3.99% for the first year, 4.99% for the second year, and 5.99% for years 3-30.
The Cost To Refinance A Mortgage: What To Expect
Regular purchases can be offered by the lender, which can only be done by paying discount points. This selection is usually made by the lender, but sometimes we see the seller assist with this. – Toby
Regular purchases help lower your payments, and instead of saving you money in the first few years, it will save you money over the life of the loan. Of course, the price of a permanent purchase is higher than a temporary purchase, but in the long run you can save a significant amount of money. If you plan to own the home for more than one or two years then this would be the best option for you.
Check out our breakdown below and see how a fixed purchase can save you up to $180 per month in monthly payments and up to $65,000 over the 30-year life of your loan. Keep in mind that this information will vary based on your personal situation, including the interest rate at the time you apply, the type of loan, credit score, and credit history.
If you want to make your monthly payments cheaper when interest rates are high, consider lowering your interest rate temporarily or permanently or renewing every 6 months to once a year. Remember that eligibility varies depending on the individual’s situation and the lender they use. We recommend speaking with a lender as early as possible in the home buying process.
Austin Texas Home Buying Purchasing Power
Look for our next feature article (blog) where we discuss repayment and how it might be an option for you. Could the idea of buying your interest benefit you and your home purchase? What is the difference between a temporary purchase and a permanent purchase?
Dave Brice of Basic Home Loans explains what it means, the difference between the 2 and why you might want to take advantage. If you’re buying a home and want a lower price, ask your realtor or lender about using a seller’s contract to buy their lower price.
If this is an agent you are interested in adding to your property, please contact Madrona Group or Dave Brice.
“The best way to find yourself is to lose yourself in the service of others.” ~ Gandhi [Seen as representative of America’s top 3.5%. ] [ Jason Fox was born in Everett, WA now in the Meadowdale community of Lynnwood and has lived in various parts of the Puget Sound area in between. Working in Real Estate sector for 20 years at various levels. From CEO of a real estate CRM partnership, founder of 2 real estate marketing organizations, nationally recognized blogger with the Jason Fox Real Estate Marketing Blog, and marketing manager for a title and escrow service. [Jason is now an award-winning real estate agent and co-founder of Madrona Group, John L. Scott Ballard and John L. Also co-owns Scott Westwood. ] [ Working in the community, Jason is a proud part of Autism Speaks’ efforts to raise awareness about autism. The project interests her because she has an 8-year-old son, Hudson, diagnosed with ASD. Jason is also involved in helping the homeless in the greater Seattle area with Neighbors in Need, the Forgotten Children’s Fund, Weld Seattle, and the Union Gospel Project. ] [ “My passion is being able to give back to the community that has given so much to me.” ] [When he’s not helping his friends and family with homework, he enjoys being a father to his 4 children, Carter, Rowan, Tyler, and Hudson, and a husband to his wonderful wife, Sarah. Enjoys hiking, working around the house, cheering on the Seahawks, Mariners and Huskies and playing golf. ] Posted by Ricky Kane on Thursday, October 20, 2016 at 9:00 AM Ricky Kane / October 20, 2016 Comments
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The interest rate on a 30-year fixed rate mortgage is currently 3.47%. Rates have remained at or below 3.5% each for the past 16 weeks, hitting historic lows.
The interest rate you secure when buying a home affects not only your monthly mortgage payments, but also your purchasing power.
Buying power, simply put, is the price of the home you can afford for your available budget. As prices rise, the amount of house you can afford will decrease if you want to stay within a fixed monthly housing allowance.
The chart below shows how interest rates will increase if you plan to buy a home at the national median price and keep your salary and interest at $1,100 per month.
What Is Apr?: An Apr Vs. Interest Rate Explainer
Each quarter the interest rate increases, the amount of home you can afford decreases by 2.5% (in this example, $6,250). Experts predict that mortgage rates will be closer to 4% at this time next year.
To access the original article based on this post, you can click here. You can also find more real estate investing tips by checking out our blog.
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