Happy Thursday – I hope you are doing well. For this week’s video I want to discuss interest rates and options to help until rates come down. If you have been watching the market, rates are continuing to go up and will remain volatile through the end of year. Based on this, I want to discuss a few loan options that will help your interest rates while we are waiting for rates to come down. Please see below for details on the 2/1 and 1/0 buydown. We were using these a lot last year before inventory tightened up. Now that rates are rising, and we are heading into end of year, I think these will be great options for some buyers and sellers.
2/1 Buydown
•This is a 30-year fixed mortgage. Once you lock your rate, it can never go higher, and you benefit from a rate that is 2% lower the first year and 1% lower the second year.
•The seller must pay the buy down fee which equates to about 2.25% of the loan amount. In our current market, this is much better than the seller having to do a price reduction, and if needed they can build the cost into their sales price.
•Once you close on your home, the buy down fee goes into an escrow account and is used to pay the difference in the interest rate each month for the first 2 years. If the buyer refinances before the 2-year period, any left-over money in the escrow account gets credited back to the buyer.
•This is better than a traditional buy down because it saves the buyer more money. On a traditional buy down, the buyer will not typically recoup the buy down credit if they refinance.
•The main issue we see with this program is getting the seller to pay the 2.25% in a tight inventory market.
1/0 Buydown
•This is a 30-year fixed mortgage. Once you lock your rate, it can never go higher, and you benefit from a rate that is 1% lower the first year.
•The seller must pay the buy down fee which equates to about .75% of the loan amount. In our current market, this is much better than the seller having to do a price reduction, and if needed they can build the cost into their sales price.
•Once you close on your home, the buy down fee goes into an escrow account and is used to pay the difference in the interest rate each month for the first year. If the buyer refinances before the 1st year, any left-over money in the escrow account gets credited back to the buyer.
•This is better than a traditional buy down because it saves the buyer more money. On a traditional buy down, the buyer will not typically recoup the buy down credit if they refinance.
•The main concern with this option is while we expect rates to come down next year, we are not certain how much they will come down in 12 months. The benefit is that it is easier to negotiate the seller to pay this option.
Please email us if you would like to see how this program would work for you.
Weekly Newsletter
https://mortgageratesweekly.com/cmg-teamsadler/6504e7a16c53a311d689a1b3?s=em
Stewart Sadler
Managing Partner
Cornerstone Mortgage Group
404-441-4765
ssadler@cmghl.com
http://www.cmghl.com
Georgia Residential Mortgage Licensee: 21412 • Company NMLS: 147913 • Individual NMLS: 147938
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