 Sam
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Joined: 21 May 2005
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Location: CALIFORNIA
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 Posted: Wed Apr 07, 2004 4:01 am Post subject: Interest Rate Buy-Down |
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Rate buy-down is a way by which you can offer your purchaser a reduced fixed mortgage rate. This can be done by prepaying a part of the interest yourself.
Example:
A buyer of your property needs a mortgage worth $200,000. But he may not prefer the prevailing fixed interest rate. Now if the current mortgage rate is 8%, then you can offer to buy down the rate by 2% for a year. So the buyer gets a 6% interest rate and so he makes comparatively lower payments.
The cost required to buy down your rate by 2% for a year on a $200,000 mortgage would be $184.40. You should pay this amount on or before the closing of the sale of your home. |
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