Hey Utah Home Buyers! If you’re diving into the world of mortgages, you might have noticed that mortgage rates can shift quite a bit. They’re influenced by various factors, some of which are beyond our control, but there are also aspects you can manage yourself. One great tool at your disposal is an interest rate buy down, which can help you lower your mortgage rate—either temporarily or permanently. The best part? This can lead to reduced monthly mortgage payments!

However, it’s important to remember that getting a buy down may require some additional upfront costs when you’re closing your loan.

Why Consider Buying Down Points?

Right now, buying down points is a popular strategy! With the current high interest rates and low housing inventory, the once booming housing market has cooled down. In certain situations, this low inventory might even lead to bidding wars. On the flip side, some homes can sit on the market for quite a while. If you find yourself in this situation, it could be a great opportunity to negotiate with the seller. Sometimes, sellers are open to helping buyers out with interest rate buydowns to help get their home sold more quickly.

Building a Buy down into Your Home Loan

Many mortgage companies are now offering the option to incorporate a point buy down directly into the mortgage rate. Since the numbers can vary widely, it’s good to know that there might even be opportunities for you to receive some credits if you opt for a higher interest rate.

To give you a better idea, let’s walk through a quick example of the cost involved in a buy down:

Home Price: $400,000
Credit Score: 750
Down Payment: 5% ($20,000)
Original Interest Rate: 7.5% (just above par)
Desired Rate: 7.375% (slightly below par)

In this scenario, the cost for the buyer to buy down the rate would be around $475.00.

With interest rates currently higher than they have been in the past, more and more of our clients are exploring interest rate buy downs to make homeownership more affordable.

If you’re considering buying a home, don’t hesitate to reach out to us with any questions you may have about the process. We’re here to help you navigate these waters and find the best solution for you! Happy house hunting!