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