Posted on: 22nd May, 2009 08:02 am
What does mean by "buy down your Interest Rate"?
What are the various factor influencing the process of buy down?
I have a loan with interest rate of 6.25%. I want it lower and was told that I could buy the interest rate down.
What are the various factor influencing the process of buy down?
I have a loan with interest rate of 6.25%. I want it lower and was told that I could buy the interest rate down.
buying down the rate is simply paying more in discount points so as to get a lower rate.
here's an example. today you might be able to get a loan at a rate of 6% and pay no points. if you wish to have a rate of 5.5% instead, you could pay, for example, half of a point. to go to 5%, you might have to pay 1.5 points. each "point" is 1% of the loan amount, so if you borrow $100,000, a point in that instance would be $1000.
i hope this makes sense to you. keep in mind that the numbers i used for rates and costs are strictly conjecture, and don't necessarily relate to reality today.
here's an example. today you might be able to get a loan at a rate of 6% and pay no points. if you wish to have a rate of 5.5% instead, you could pay, for example, half of a point. to go to 5%, you might have to pay 1.5 points. each "point" is 1% of the loan amount, so if you borrow $100,000, a point in that instance would be $1000.
i hope this makes sense to you. keep in mind that the numbers i used for rates and costs are strictly conjecture, and don't necessarily relate to reality today.
Hi Robert,
Buying down the interest rate means paying points. Either origination or discount points, it works the same way. One point is one percent of the loan amount. For example, if your loan amount is $100,000 and the interest rate is 6.625%, you might buy it down to 6.375% by adding one point ($1,000) to your closing costs. There is no set amount a buy-down will cost -- generally one point will buy down the interest rate about .25%. Negotiate with your loan officer
Buying down the interest rate means paying points. Either origination or discount points, it works the same way. One point is one percent of the loan amount. For example, if your loan amount is $100,000 and the interest rate is 6.625%, you might buy it down to 6.375% by adding one point ($1,000) to your closing costs. There is no set amount a buy-down will cost -- generally one point will buy down the interest rate about .25%. Negotiate with your loan officer
