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Interest Rate Buy-Down

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Sam

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Joined: 21 May 2005

Posts: 813
Location: CALIFORNIA
347.04 Dollars($)

Posted: Wed Apr 07, 2004 4:01 am Post subject: Interest Rate Buy-Down	Like 0 Dislike 0

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.