Slash Your Mortgage Rate Without Waiting For Rates To Drop!

There's a way to lower your mortgage interest rate and save thousands without waiting around for the rates to drop. It's called a mortgage interest rate buy down, and it's an extremely powerful strategy to help you combat the high interest rates that are scaring buyers away from a home purchase. A buy down is when you pay upfront to reduce your interest rate, either temporarily or permanently. Although in this market, it's the temporary buy downs that have all the power. The goal here is lower monthly payments to make homeownership more affordable month to month, and in many cases get the seller to pay for it. So when you're ready to put an offer on a house, sometimes you might not want to offer 10 or $15,000 less than the list price. When you can consider using a 2:1 temporary buy down, that'll keep your payments lower for the first couple years while you're in the home. All right, here's how it works. As I mentioned, the permanent buy down solution doesn't make a lot of sense right now for first time home buyers because you can't lower your rate enough to make a significant difference in your monthly payment. So what I'm going to do is I'm going to give you a real life example. At today's interest rates at 6.7%, we use a $400,000 home, about the average that homes are going for right now. I'm going to go through the math right here and you can see exactly how this works. So your regular purchase is $400,000 at 6.7% for all 30 years. That's going to cost you $3,273 per month. Now, when we add the mortgage interest rate buy down, you're going to be looking at your first year, same $400,000 home at 4.7% for 12 months. That's a savings because you're looking at $2,817 for those first 12 months. Second year, 400,000 at 5.7%, still giving you a nice discount. And that's $3,039 a month. So month one through 12, you save $455 every month. In months 13 through 24, that's where you're going to save $234 a month. And all you have to do to get this buy down is get the seller to give you a credit of $7,268. Okay, so how do you get the seller to pay for this? That's where a good realtor comes in. Hey there. This is David Sidoni with Real Brokerage. Hey, good to hear from you. You know, I just took my buyers to see 123 Pineapple street and they notice had been listed for a few months at 400,000, but it hadn't sold yet. Do you think your sellers would be open to some other options? Yeah, I'm not sure why the home hasn't sold at this price, but I don't know if my sellers are going to go too crazy. So what would that offer look like? Well, my buyers originally wanted to offer 385 or 390, but I've got a solution that'll work for everybody. More of a win win. What if we offered 400,000 and the seller gives a credit back for 2% and that way the buyers can use that for a mortgage interest rate buy down. Yeah, that sounds better than a price reduction. I do think they'd like to see an offer with a higher price even with the credit back. Great. So we'll put the offer in at 400,000 and assuming the home appraises, which I'm pretty sure it will. Yep. Then with the $8,000 back, your seller is going to net $392,000. Well, I know they're not thrilled with the home sitting here with no offers in. So it's probably better to get an offer in now than to have to go way lower on the price than they were looking for. Hey, that's great. I'll put together the offer and you'll have it within the hour. Great. I'll let them know. Getting the seller paid for doesn't work in every situation. But here's some of the things to look for. To know that you may have an opening to have your realtor negotiate this for you. Long days on the market, maybe you're the single offer. Maybe you or your realtor has figured out that there's some desperation from the seller. Or maybe you or your realtor has developed some rapport with the sellers and you think you can negotiate a win win for both parties. Now that you know what a buy down is, you can also find lenders who offer buy downs as an incentive as well as they're not always easy to find. But now that you know what to ask for, you can see if they have a buy down that works for you. Now in this example, I talked to my friends at Gilt Mortgage. They're not a sponsor of this video. They just happen to have a buy down program going on right now for the first year. They're going to offer one point off of your loan all paid for by them. Now the ultimate would be to get the seller credit so that they can pay for the whole two one buy down and you get 2% off the first year, 1% off the second year. But that one year paid for by the lender is a nice alternative in competitive markets where seller credits aren't so readily available. So how do you use this? Well, you ask your realtor if this strategy is going to work in your market. Make sure that they know what you're talking about, that they have experience negotiating buy down deals. Also they can connect you with a lender who can show you even more options. If you need help finding a guide in your area, feel free to reach out to us at how to Buy a Home and we can answer any questions the links in the descriptions and YouTube should be suggesting another video right here to help you with your home buying process.