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Seller-Funded Permanent Buydowns

Mortgage Hack #12

How it works: A permanent buydown mortgage has a lower interest rate for the entire term of the loan. Motivated sellers will occasionally offer to pay for points to lower a homebuyer’s interest rate or to allow them to qualify for the loan.

A common misconception: 1% = 1 point.

Truth: 1 point = 0.25% of the mortgage rate.

Buying down the rate by 1-point costs 1% of the loan amount.

Benefit to Buyers:

The buydown reduces the buyer’s principal and interest for the life of the loan.

Benefit to Sellers:

A great negotiating tool whereby the seller can keep their desired listing price of their home yet make the property attractive to buyers.

Reference: 2022 Keller Mortgage LLC

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