| A very important tip to save money when | | | | and charge a fee that reflects their loss |
| buying a house is to never buy down the | | | | with the buy-down. |
| interest rate. | | | | |
| | | | Buyers can pay any mortgage rate they want, |
| A buy-down is when you as the borrower, pay | | | | as long as they pay the fee involved. This |
| extra money to the lender for a cheaper | | | | means Sam could qualify for a 9% mortgage |
| interest rate on your loan than you would | | | | rate but could get a loan of 4% or 5% as long |
| normally qualify for. For this privilege the | | | | as there is a buy down fee paid. A buy down |
| lender will charge you the appropriate buy | | | | loans price depends on how long you want the |
| down fee. It sounds good but you can be sure | | | | interest rate lowered, by how much, and how |
| that the lender will not let you do it unless | | | | often the interest rate will go up or down. |
| it was in their best interest. This only | | | | Don't fall for this! |
| makes sense if you are 100% sure you will be | | | | |
| in the house for over 10-15 years. Otherwise | | | | Chances are that by the time you move, you |
| the math just does not compute. If you want | | | | will not have paid that much extra in |
| to pay less in interest, pay off the mortgage | | | | interest to justify paying this fee. In |
| sooner or make extra payments to principal. | | | | addition, more money could be saved by taking |
| | | | out an adjustable rate mortgage rather than |
| Banks and mortgage companies are always on | | | | paying a buy down fee. Many people consider |
| the look out for providing the most generous | | | | buying down the rate a good deal because they |
| looking terms as possible to their buyers | | | | plan on staying in the house for a long time |
| while keeping their eyes on the prize. | | | | and because they can afford it. |
| | | | |
| The first rule of thumb with banks is that | | | | You have to allocate your money. Will the |
| they are in the business of making money. | | | | saved money be used for a new purchase, like |
| Despite low interest and mortgage rates, | | | | home improvements on your new property? |
| banks try to offer additional policies | | | | Chances are, you won't be thinking of this at |
| disguised as a deal (which it is) with the | | | | the time. Buying down the rate is simply too |
| requirement that a fee be paid. One such | | | | expensive considering your home might not be |
| example is a buy-down fee. | | | | occupied 3-4 years down the road. |
| | | | |
| The buy-down fee is requested when lenders | | | | The buy-down fee should not be a savior for |
| offer a lower interest rate on your loan. It | | | | anyone. Although rising interest rates is a |
| is typically paid during the closing period, | | | | cause for concern, waiting for them to drop |
| although it can also be paid as soon as you | | | | isn't the solution. Remember, you can always |
| apply or when you lock your rate with a | | | | apply for mortgage refinance if interest |
| commitment agreement. This is also known as | | | | rates go down. Also, sellers may offer to |
| collecting points. Because of the newfound | | | | take care of the buy down fee for you in |
| discount, lenders are forced to scramble in | | | | extenuating circumstances. This especially |
| discounting a percentage of the loan amount | | | | occurs when the market slows down. |