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If you’re currently in the market for a new home, you’re likely keeping a very close eye on interest rates. Interest rates have risen, which can impact how much you pay on your monthly mortgage payment.
Today, I’ll share one way you can reduce your interest rate. Not many people know about interest rate buydowns, but they’re something you should be aware of as a buyer in our current market.
An interest rate buydown is a way for a buyer to get a lower interest rate on their mortgage by paying for discount points during the closing process. Discount points are also known as mortgage points or prepaid interest points–it depends on which term your lender uses.
To purchase discount points, a one-time fee is paid upfront, and the discount points will lower the interest rate for the term of the loan. As a result, the borrower pays less in interest with their monthly mortgage payment, making the home more affordable for the buyer.
In most cases, the discount points are paid for by the seller. In a slower real estate market where homes are staying on the market for longer or are being reduced in price, the buyer can ask a seller to buy down their mortgage through discount points as an incentive to buy the home.
As a buyer, interest rate buydowns are something you should keep in mind when negotiating, especially if you’re buying in a slower market where there isn’t much competition.
Buydowns are also something to consider as a seller as it can be a selling point for potential buyers. If your home isn’t the hottest on the market, offering a buydown as an incentive can be a smart move.
Interest rate buydowns and discount points are a unique tool that can be used to make a buyer’s monthly mortgage payment more affordable, which is useful to know whether you’re a buyer or a seller!
Want to learn more about interest rate buydowns and other ways you can decrease your interest rate in this market? Just hit contact me and I’ll get you some more information!
