In this rising interest rate market, a permanent interest rate buydown may be how buyers and sellers come together for a win-win. The traditional option of using a seller credit to buy down the rate is still a tried and true way of getting a buyer the payment they want and the seller the sales price they want. Let’s explore what this is and why it can help you put more transactions together.
When a seller provides the buyer with a closing cost credit, those funds can be used for any costs associated with obtaining the mortgage from the lender. Paying points, or prepaid interest, to lower a buyer’s mortgage rate for the duration of the loan is an allowable cost that can be covered using a traditional seller closing credit. But why would a buyer do that instead of covering all the other costs?
The answer is simple – using the credit to buy the rate down could lower the mortgage payment by hundreds of dollars per month and add up to tens of thousands of dollars over the life of the loan. This can help offset the sticker shock of higher interest rates or help bridge a negotiation gap between buyer and seller.
In part two of our Seller Funded Buy-down series going out next week, we will tackle the concept of temporary buydowns and how to leverage this with your buyers and sellers. Now more than ever, teaming up with a Key Mortgage loan officer upfront can be your competitive advantage. Reach out today to see how you and your client can take advantage of this strategy.
