Buydown Programs
Red Oak Mortgage is continually looking out for new ways to help our buyers in this challenging real estate market. We offer Buydown Programs to our clients on a variety of loan types!
A “buydown” is a mortgage financing technique with which the buyer attempts to obtain a lower interest rate for at least the first few years of the mortgage, or possibly over the entire loan term!
PERMANENT BUYDOWN
A borrower may elect to pay points to PERMANENTLY buy down an interest rate for the life of the loan
Buying the rate down by 0.25% will typically cost one full ‘point’ (or 1%) of the loan amount as the buydown fee, but this is subject to market conditions.
Break-even point should be calculated to ensure you recoup the costs within the first five years of the loan.
TEMPORARY BUYDOWN
A borrower may elect a buydown fee that lowers the interest rate for a TEMPORARY period of time at the beginning of the loan term.
A one-time fee, known as a subsidy fee, applies. Typically, the cost of the buydown is roughly equal to the amount the buyer would save in payment.
Common options include ‘3-2-1’, ‘2-1’ and ‘1-0’ buydowns