When a listing isn’t moving, a price reduction is often the first consideration. But there’s another option worth exploring: a temporary mortgage rate buydown. Rather than lowering the asking price, sellers may be able to contribute toward reducing a buyer’s mortgage payments during the first few years of their loan.
Depending on the mortgage program, temporary buydown options may include:
- 3-2-1 Buydown. Payment assistance equivalent to a 3-percentage-point rate reduction in year one, 2 points in year two and 1 point in year three.
- 2-1 Buydown. Payment assistance is equivalent to a 2-point reduction in year one and 1 point in year two.
- Buydown. Payment assistance equivalent to a 1-point reduction in the first year.
For sellers, a temporary buydown may offer an alternative to reducing their listing price. For buyers, it can provide welcome payment relief during the early years of homeownership.
* Temporary interest rate buydowns are subject to loan program availability, eligibility requirements, underwriting approval and applicable seller contribution limits. A temporary buydown reduces the borrower’s monthly payment for a specified introductory period through funds contributed at closing; it does not reduce the contractual interest rate on the mortgage loan. After the buydown period ends, the borrower is responsible for the full monthly payment based on the loan’s contractual terms. Borrowers must qualify based on the full note rate. Not all loan products or transactions are eligible.