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WHAT IS A BUY DOWN | 32819 | 32836 | Dr. Phillips

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WHAT IS A BUY DOWN

Many wonder what is a buy down? A buy down is a strategy in real estate and mortgage financing that involves in paying additional funds at the beginning of a loan term to reduce the interest rate or monthly mortgage payments for a specific period of time. The upfront payment, sometimes referred to as buying down points or simply points is a form of prepaid interest that allows borrowers to secure more affordable loan terms. Here how this generally work, the borrower makes a one time payment to the lender at closing, usually expressed as a percentage of the loan amount. Each point typically cost one percent of the total loan amount. So in return for the upfront payment, the lender lowers the interest rate on the loan. This reduction can be temporary or permanent, depending on the term of the buy down. The reduced interest rate or monthly payments typically last for a predetermined period, such as one, three or five years. After the specified period, the interest rate and monthly payments would typically adjust to the original terms of the loan.

MONTHLY SAVINGS

With a lower interest rate, the borrower enjoys a smaller monthly mortgage savings during the buy down period. The can be beneficial for borrowers who want to reduce their initial financial burden or who anticipate a decrease in income during the specified time frame. Or it can work the opposite way, this can help get you in and during that period you get raises. It is important to note that buy downs may not be available for all loan programs or in all markets. The terms and conditions of a buy down, including the cost and resulting interest rate reduction can vary based on factors such as the lender, loan type and current market conditions.

Before considering a buy down, it's essential for borrowers to carefully evaluate whether the upfront cost is worth the potential savings over the specified period. A mortgage professional can provide guidance and help determine if a buy down aligns with a borrower's financial goal and circumstances. Consult your trusted advisor such as myself to put you in touch with several lenders to find the best fit.

TRUSTED ADVISOR

As a trusted advisor, professional realtor and retired military veteran I am here to serve you in the Dr. Phillips and Central Florida area to purchase or for the sale of your home. In the absence of trustworthy information whether it's a housing crisis or local housing market, real estate decisions are being driven by fear, uncertainty and doubt. We as trusted advisors drive the real estate community to ensure you are making the right decision.

Part of my job is to keep you informed and educated of the local housing market trends, pricing and inventory level, buying information on the buying and selling process to include common real estate terms and videos. It is important to keep updated on the market trends, don't get confused with the media, they talk national data, I can provide the most up to date local area data.

So don't let this shifting housing market delay your dreams, data reveals home values typically appreciate over time and that gives your net worth a nice boost. When you are looking for a home, look for your realtor with the heart of a teacher. If you are ready to start your journey, contact me today at 850 496-6412 to begin a new walk to homeownership and all your real estate needs.



All listing information is deemed reliable but not guaranteed and should be independently verified through personal inspection by appropriate professionals. Listings displayed on this website may be subject to prior sale or removal from sale; availability of any listing should always be independent verified. Listing information is provided for consumer personal, non-commercial use, solely to identify potential properties for potential purchase; all other use is strictly prohibited and may violate relevant federal and state law. The source of the listing data is as follows: Stellar MLS (updated 4/14/24 12:22 PM) |
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