Translate:

EN

Can I Buy Down My Mortgage?

Can I Buy Down My Mortgage?


Can I Buy Down My Mortgage?

You’ll make a variety of decisions when you’re purchasing a home. One of them is whether you should “buy down” your mortgage. Not sure what that means, or if it’s right for your specific situation? Read on to help you decide.

What does it mean to buy down mortgages

If buyers want to lock in a better interest rate for their mortgage loan, they can do it by buying down their mortgage. You might also hear this described as “buying points.” This process is usually negotiated between the potential buyer and lender, although sellers or builders may offer to buy down a mortgage to sweeten the deal.

So, what does it actually mean? One of the mortgage players pays additional money to secure a lower interest rate for the mortgage loan. Each point is equal to 1% of the loan value. A lower interest rate may make the monthly payment more affordable to the new homeowner.

Are there different types of buy downs?

Yes. Buying down a mortgage can be structured in a few different ways, depending on what you’re trying to accomplish.

  • There’s a buy down that affects the life of the loan. This requires a large sum on the front end to ensure the mortgage rate stays the same for the length of the mortgage loan.
  • A 2-1 buy down makes the interest rate 2 percentage points lower the first year and 1 percentage point lower the second year.
  • A 3-2-1 buy down makes the first year’s interest rate 3 percentage points lower, the second year’s 2 percentage points lower, and the third year’s 1 percentage point lower.

When is buying down a mortgage beneficial to a homeowner?

Buying points is not the best move for every buyer. Having the seller or builder pay for the buy down is often more beneficial to the buyer, unless they raise the home price, which could wipe out the savings of a smaller interest rate. A buy down also makes sense if the borrower expects their income to rise significantly in the next three to five years.

For example, buyers who have just begun their careers may decide to use a buy down for the mortgage’s first few years. Since it takes a few years for a buy down to be worth the investment, people who don’t plan to move anytime soon may also be good candidates for a buy down.

When do buy downs happen?

You can expect to pay for a mortgage buy down during your closing.

Want to know more about buying points to decrease your mortgage interest rate? Or do you just have questions about mortgage loans in general? Don’t hesitate to reach out to our team at MIG to get those questions answered by our knowledgeable loan officers!

Share

Leave a comment

Mortgage Investors Group, based in Tennessee, offers residential financing in a number of states in the southeast, See MIG Service Areas. Terms and conditions to apply to home financing. We want to share with you the loan terms vary based on several characteristics and your financial profile. These include but are not limited to loan program, loan purpose, occupancy, credit history, credit score, assets, and other criteria per loan type. The repayment terms and interest rate may vary from time to time. The terms represented here are based on certain assumptions outlined below and/or noted on the loan outline page. Additional details concerning privacy, program disclosures, licensing specifics may be found at migonline.com Legal Information.

MIG Loan Officers will help gather the information needed for an individual assessment to provide home financing which matches the loan characteristics with your home financing needs based on your financial profile, when you are ready to begin a full loan application. For estimates and general information before that step, the basis for which the mortgage financing information are as follows:

  • Rates are subject to change at any time.
  • Rate locks are available at current terms for 30 to 180 days based on program type, credit profile, property location, etc. which will affect the available rate and term.
  • Rate locks are available at current terms for 30 to 180 days based on program type, credit profile, property location, etc. which will affect the available rate and term.
  • Payments will vary based on program selection, current rates, property location, etc.
  • Not all programs are available in all states.
  • Some loan programs may not be available to first time home buyers.
  • Terms and conditions apply, which may include restrictions or limits per loan program.
  • Information is generally based on primary residence occupancy with no cash out when refinancing.
  • Unless otherwise stated, terms shown are estimates based in part on credit score of 700 or higher; owner occupancy, escrow account is established for taxes and insurance(s); debt-to-income ratio no higher than 43.0%; PMI applies to conventional loan programs over 80.0% LTV; VA,FHA & RD require insuring fees included in loan and/or payment; fixed rate, 30 year term.

An MIG Loan Officer is available to help with your financial details to determine which characteristics apply to your situation for a personalized look into which loan program best fits your home financing needs. Please use the Find a Loan Officer link or reach out to Mortgage Investors Group at 800-489-8910. Equal Housing Lender 1.2020