What’s a buydown? If you don’t know, you may be missing out on an important tool that can help both buyers and sellers make the home financing process smoother. In today’s video, Jamie Cavanaugh explains how buydowns work, and some of the benefits of them.

Transcript:

What are buydowns and how can I benefit from them as a buyer and as a seller?

An interest rate buydown is just as it sounds.  It is a way to get a lower interest rate on your home loan.  What you need to know is that these are “temporary” in nature. 

Typical buydowns may be 3/2/1, 2/1, or even a 1 year buydown.  The longer the buydown term, the more costly it is up front. 

To explain, a 3/2/1 buydown simply means that your interest rate will be 3% below market rate in year 1, 2% below in year 2, and 1% below in year 3.  Then from the 4th year on, you will have the market rate.

Yes, now you can figure out what 2/1 means an so forth.  The benefit to a buyer is a much lower payment to start, so while you are taking on additional expenses of getting settled in a new home, you can afford it. Then as you are growing in your job and earning more money, you can take on the increases easier.

The benefit to a seller to offer to pay for the buydown is that they open up the market to more buyers that can afford their home.

In today’s market buydowns are a terrific tool.

As always, to learn more, don’t hesitate to reach out at any time.

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