What is it?

A temporary rate buydown creates an opportunity for a buyer to make lower monthly mortgage payments during the first 1-3 years. This is made possible by lowering the interest rate for that window of time. For example:

If the interest rate is currently 6.5%, the Seller could buy down the Buyer's interest rate on a new loan, say 4.5% for 24 months. 

Not only does the buyer have lower monthly payments for the first 1-3 years, but they also pay less in interest over the duration of the loan.

How does it happen?

When this incentive was initially developed, the buy down was paid for by the seller, who made up the difference to the loan company. These days, many lending companies themselves are offering this option to sellers as an alternative to taking cash. Nerd wallet points out that “When comparing lenders, this is a feature worth watching for.”

Who benefits?

Everyone! For Buyers, mortgage rates can feel daunting, and first-time home buyers may be especially drawn to sellers or lending companies offering temporary rate buydowns. Leaving an opportunity to save more during the first 1-3 years of home ownership.

Sellers benefit in many ways as well, especially on the negotiation table. For example, offering a temporary rate buy down can keep a seller from having to lower their price in order to sell the property.

Still a bit confused?

Not to worry, real estate agents exist to help you navigate options like this! Check out this blog post to know what to look for in a Maui Real Estate Agent.

If you're interested in buying or selling a home and would like to work with someone who knows the ins and outs of Maui Real Estate, reach out to one of our experienced Realtors by calling 808.879.3402, or you can reach one of us directly from our website at www.bellorealty.com.  Mahalo for choosing us!

Posted by Kaitlen Conney on
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