Why temporary rate buydowns are so popular in our current market.
Have you heard about temporary rate buydowns in our current real estate market? Ever since interest rates increased, these products have become increasingly popular. If you want to buy or sell a home, temporary rate buydowns are the key to understanding our market. Today, I’ll explain what buydowns are, how they work, and how they help buyers and sellers.
“Temporary rate buydowns can be win-wins for buyers and sellers. ”
First, temporary rate buydowns are different from permanent rate buydowns. For permanent rate buydowns, the lender would receive an upfront payment to permanently reduce the interest rate on the mortgage. Temporary buydowns, on the other hand, only last for a set amount of time, but they have a lower upfront cost. For example, a 2-1 buydown reduces the interest rate on a loan by 2% for the first year, by 1% for the second year, and the rate returns to normal in the third year.
So why are temporary buydowns so popular? As you probably know, interest rates have fluctuated widely in our market recently. The hope is that our current high rates won’t last forever, so you can enjoy low rates with a temporary rate buydown and simply refinance once the discount expires.
A common situation we’re seeing in our market is for sellers to help pay for a buyer’s temporary rate buydown. This is a great incentive for buyers, especially since it can be expensive to purchase a home in the current market. ** ** Often, negotiating a 2-1 buydown can lead to a win-win situation where the seller gets a high price and the buyer gets a lower monthly payment.
If you have questions about temporary rate buydowns or anything else, please call or email me. I am always willing to help!
