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