How Buyers Can Lower Their Interest Rates
Here’s how buyers can reduce their interest rates and purchase a home.
One of the biggest concerns for buyers right now is our high interest rates. They’re making homes less affordable, and it seems like they’re only going up. However, did you know there are ways to lower your interest rate?
Some sellers will give you 2% in concessions to buy your interest rate down. In any mortgage transaction, when you buy a house, there are always two sets of costs. You have a down payment, and you have closing costs. Fortunately, closing costs can be paid for by the seller.
A few years ago, no sellers were offering concessions on closing costs because there was a major shortage of homes. Buyers had to compete with each other, so they didn’t have much negotiating power. Why would a seller offer concessions when they didn’t have to?
Now, buyers have options. Using the money you receive in concessions, you can purchase an interest rate buydown. There are two main types of buydowns: temporary buydowns and permanent reductions.
"Interest rate buydowns can save you a ton of money."
For a permanent reduction, it typically costs about 3% of the purchase price to lower your rate by 1%, but that can amount to significant savings over time. On a $400,000 home, that can save you $3,000 a year.
On the other hand, a 2-1 buydown reduces your mortgage payment for the first two years of your loan. The first year, it lowers your rate by 2%, and the second year, it lowers it by 1%. After that, you pay the full interest rate. This is a great way to ease into a higher payment, and it’s less expensive than a permanent reduction.
It has never been a better time to buy. Buyers have a lot of negotiating power, and interest rates aren’t going to stay this high forever. Now, you can negotiate a great deal with your seller and refinance whenever rates eventually come down. It’s a win-win situation.
If you have questions for me about today’s topic or anything else, please call or email me. I am always willing to help.