Should You Consider a Mortgage Buydown?

Buying a Home
Should You Consider a Mortgage Buydown?

If you’re buying or selling a home right now, rising interest rates and home values are a consideration you’re making! For sellers, this means a smaller pool of potential buyers. For buyers, there’s a smaller inventory of homes on the market that may fit your price point. Given these challenges, should you consider a buydown?

What is a buydown?

A buydown is a way to lower the monthly payment on a mortgage by reducing the interest rate on the mortgage loan for a predetermined period of time. Buydowns use funds from the seller or buyer to purchase discount points to temporarily or permanently buy down the interest rate. A temporary buydown lowers the interest rate during initial term of the loan, usually for a period of one or two years, then the rate returns to the original locked in rate for the remainder of the loan. A permanent buydown allows buyers to lock in a lower interest rate for the life of the loan.

Why do sellers like buydowns?

Buydowns are appealing to sellers because they allow a homeowner to contribute closing cost funds towards a buydown instead of taking a price reduction to incentivize buyers. It can also help the home to stand out in the marketplace. Lastly, a lower interest rate helps a buyer’s budget extend further, which may increase the pool of eligible prospective buyers.

Why do buyers like buydowns?

Buyers like buydowns because they can provide some helpful budget relief amid rising interest rates. The option for a lower interest rate increases their buying power and expands the pool of homes they may be able to consider. Buydowns may also offer some tax relief as well. Since they are considered mortgage interest they may be tax deductible depending on the buyers’ specific tax situation. Buydowns present negotiation tool for the buyer, helping them to present the most attractive option to the seller. To learn if a buydown may be right for you contact an Ameris Bank mortgage banker today.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All loans subject to credit approval.

Information presented in the Financial Advice website is provided for educational purposes only and is not related to Ameris Bank's actual products or services. Ameris Bank makes no representations as to the accuracy, completeness or specific suitability of any information presented. Information provided should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. Ameris Bank recommends you consult a professional for any specific guidance you are seeking.