This strategy can help whether you're buying or selling.
In times of rising interest rates, affordability can suffer. Smart sellers, buyers and agents can offset the impact of higher rates with a Seller Paid Buydown.
What is it?
Mortgage prospects often know they can lower the mortgage interest rate for the life of their loan by paying “points.” With a Seller Paid Buydown, the home seller pays points to reduce the rate for the buyer. Also ask me about a 2/1 Buydown, where the seller, builder or realtor pays to discount the rate 2% duing the first year and 1% the second year. This will help you ease into your mortgage and lower monthly payments temporarily.
How does it help?
The Seller may be able to sell for a higher price if they include the Seller Paid Buydown concession. They can reduce the cost of the points from the sales price to lower their capital gains tax, if required.*
The Buyer gets a lower rate and lower monthly payment without paying the upfront cost of points. The buyer can even offer more for the home (as long as the appraisal supports the value) in order to get the seller concession. In this scenario, the lower rate on the entire loan amount will offset the marginal increase in payment brought by a higher price. Plus, the buyer may be able to take a tax deduction on the points paid, even if the seller pays them through a concession.*
A Seller Paid Buydown is just one way that today's buyers can get the home they want, despite higher rates.
Working with an experienced mortgage professional will help you discover solutions like this one. Reach out when you’re ready, and I’ll be happy to help you create a mortgage plan that works for you.
*Always consult a tax professional