Mortgage rates were tempting us last week with a little dropsy doo. Let’s hope we can keep this downward trend going as we re-enter the 7% realm! Meanwhile, 1-0 buydowns are dominating the discussion now.
What is a 1-0 buydown? This is where the seller of a home subsidizes your rate for 12 months making your payment the same effective payment as if your mortgage rate was 1% lower than your actual 30 year fixed rate. At closing, the seller has to escrow the funds and then you simply make your first 12 payments as if you had a lower interest rate. After 12 months your payment goes to the originally calculated payment based on your 30 year fixed rate.
We initially saw this strategy with 2-1 buydowns and 3-2-1 buydowns, but now 1-0 buydowns are becoming more popular as many hope rates will subside within the next 12 months and it is a much cheaper option for sellers than longer offerings.
Brandon Tompkins
brandon@tompkinsrem.com
970.545.0633
Comments
Post a Comment