How a Mortgage Rate “Buydown” Can Help you Sell in a Slow Market

A technique used in the 1980s during a slow housing market is emerging again by lenders who are trying to help move some of the unsold houses glutting local markets. This technique is called a mortgage rate “buydown.” Rather than lowering the asking price of a house, a seller offers a discount rate package that lowers the buyer’s effective interest costs and monthly payments during the first few years of the loan.

The most popular form of a buydown in the ’80s was a “3-2-1” on a fixed rate 20 year mortgage. In this instance, the seller agrees to pay 3 percentage points of the interest rate during the first year, then 2 percent during the second and 1 percent in year three. After that, the buyer pays the full rate.

If you had a house for sale at $210,000, for example, would save more money by offering the buydown rather than discounting the house price by $10,000. Click here to read the complete article »

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