Buydown: A Way To Reduce Interest Rates
ADVICE Josh Taylor. October 29, 2024
ADVICE Josh Taylor. October 29, 2024
A buydown is a way for a borrower to obtain a lower interest rate by paying discount points at closing. Discount points, also referred to as mortgage points or prepaid interest points, are a one-time fee paid upfront.
A buydown mortgage works by allowing you to buy points (sometimes referred to as discount or mortgage points) upfront in exchange for a lower interest rate.
The cost of a mortgage point is based on the size of your mortgage loan, with one point representing 1% of your mortgage. For example a $500,000 mortgage, one point would equal $5,000, two points would equal $10,000 and half a point would equal $2,500.
Ask the seller to pay. A ideal negotiation tactic perfect for the current market.
Pay cash. If you have an extra stash of cash, you can use it to pay for a lower rate. However, you should make sure that you’ve done the break-even math first.
Use a builder closing cost incentive. Homebuilders may offer financing incentives if you use their “in-house” mortgage company. You can typically use the funds to cover closing costs, including buying down your rate.
Gift funds. If you’re receiving a gift from family or a close friend, you may be able to apply the gift funds to a mortgage rate buydown.
Stay up to date on the latest trends in real estate.
July 7, 2025
How a VA Buyer Got the Keys with Less Cash Than a Rental Deposit
July 1, 2025
June 24, 2025
June 17, 2025
June 13, 2025
June 9, 2025
Local’s Guide to Hidden Beaches in San Diego County
May 12, 2025
April 24, 2025
April 24, 2025
Get assistance in determining current property value, crafting a competitive offer, writing and negotiating a contract, and much more. Contact Josh today.