Lower Interest Rates

While the Fed may or may not be lowering rates, there is a way that you can get a lower interest rate on your home mortgage. Most of the time, you can get the seller to help out with this. Here's the idea. It's called a buydown, as in buy down the interest rate to a lower value. Someone pays the bank a certain amount at closing and you get a lower interest rate. The lower rate could be for any number of years. Typically its for 7 years or less since most people will be moving after 7 years anyway. In most cases, the seller of a home is willing to negotiate price as well as other fees. Many times, the seller will pay for the buyer's closing costs if the offer is acceptable. Instead of having them pay the closing costs, have the seller buy down your interest rate. Let's look at a $250k home at 6.25% interest on a 30-yr fixed rate mortgage. The monthly payment would be a total of $1539 not counting taxes and insurance. At 5.25%, the monthly payment would be only $1381. That's a difference of $158/month or $1900/year. The seller could agree to pay your mortgage company $5700 at closing so that you could have the lower rate for the first 3 years. After that, your rate would go up to the 6.25% that you qualified for when you bought the home. Many buyers like this idea b/c it gets them started at a lower rate. Usually, the first 2 or 3 years are the toughest as far as making payments go.