Tami’s Take on the Market — November 18, 2022

We know interest rates are high and the market news is feeling overwhelming! Buying a house is expensive and getting a loan can be confusing (and also expensive!)

Has your agent or lender spoken to you about creative workarounds to buying solutions during
these times?

Can I tell you about mortgage buydowns? Buydowns can help ensure manageable mortgage payments in the future by paying more upfront to secure a lower rate. Because mortgage rates are forecasted to continue rising even slightly in the coming months, this method can be useful to protect yourself and your rate.

Here’s how it works

A 2/1 buydown reduces the interest rate by two percentage points in the first year, then by one percentage point in the second year, before rising to the full rate after that.

Either a homebuyer or a home seller can pay for a buydown. That payment may be in the form of mortgage points or a lump sum deposited in an escrow account with the lender and used to subsidize the borrower’s reduced monthly payments.

Home sellers may want to consider offering (and paying for) a 2-1 buydown if they’re having difficulty selling and need to provide an incentive to find a buyer.

Borrowers may benefit from a buydown if it allows them to buy the home they want at a price they can afford. They will also want to consider what would happen if their income doesn’t rise fast enough to keep up with their future monthly payments.

The material provided here is for information purposes only and is not to be considered financial advice. It is to be used as a guide in the purchase and/or sale of a home and attaining financing to do so. The information offered by us has been given in good faith. All data is obtained from various sources (investopedia.com, Union Bank) and has not been, and will not be, verified by broker. All information should be independently reviewed and verified for accuracy. DRE #01858429