When Should a Seller Buy Down the Interest Rate for a Buyer?

You’ve got a buyer who loves your home, but there’s one problem: the monthly mortgage payment is making them pause. You don’t want to lower your asking price just to make the deal more affordable, especially when you’ve already priced your home fairly. What if you could help lower their payment without taking a big cut on the sale price? A seller buy down interest rate can do just that.

In this article, we’ll answer what exactly this buyer incentive is and when a seller should buy down the interest rate for a buyer. To further help you decide if this tactic is right for your situation, we spoke with Claire Paris, a top Portland real estate agent with more than 20 years of experience. She says a well-structured buydown offer can make a difference.

Ask a Top Agent if You Should Offer a Rate Buydown

Sellers can often retain more proceeds by offering a buyer an interest rate buydown rather than lowering their home’s sale price. A top agent can determine which strategy is best for your situation. Our free Agent Match tool analyzes over 27 million transactions and thousands of reviews to find you a trusted, experienced local agent.

Step 1: Talk to an Expert

How does a seller-paid rate buydown work?

A seller-paid mortgage rate buydown is when you, the seller, agree to cover some of the buyer’s mortgage costs to help lower their interest rate. You typically provide a credit at closing, which the lender uses to pay for the buydown and reduce the buyer’s monthly mortgage payment.

Paris explains that there are two types of rate buydowns: temporary and permanent.

“Most people, when they think of a buydown, think of a permanent buydown, which we call ‘paying points’”, she says. A permanent buydown lowers the buyer’s interest rate for the entire life of the loan.

Paris then explains, “A seller-paid temporary buydown is where the seller pays money to the lender upfront, and it artificially lowers the buyer’s interest rate and payment for some defined period of time.”

Permanent buydowns, where a lower interest rate is secured for the entire loan term, are more commonly associated with offers from builders and lenders. So, for the sake of this post, we’ll focus on seller-paid temporary rate buydowns.



from HomeLight Blog https://www.homelight.com/blog/seller-buy-down-interest-rate/

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