Posted on: 20th Jun, 2008 10:32 am
Can someone give me a example of a buying down a rate. Just say if the rate is 6.625 and I want to buy it down to 6% how do I calculate how much it will cost.
hello favors...you can't really do the calculation all that easily yourself. frankly, you'll get different quotes from different lenders as to what constitutes the buydown at a given time.
for example, right now, i could quote you a rate of 6.625% on a 30-year conforming loan that would cost you no points. to drive that rate down to 6%, as you noted, would cost about 3 points, based on my current rate sheet.
there is not always a correlation between the original rate and the bought-down rate in terms of cost. by that i mean, you can't say it costs 1 point for every .25 in percentage because the market is too varied.
i hope this is helpful in its own way. believe me...if you're confused, you're not alone. most loan officers these days are, too.
for example, right now, i could quote you a rate of 6.625% on a 30-year conforming loan that would cost you no points. to drive that rate down to 6%, as you noted, would cost about 3 points, based on my current rate sheet.
there is not always a correlation between the original rate and the bought-down rate in terms of cost. by that i mean, you can't say it costs 1 point for every .25 in percentage because the market is too varied.
i hope this is helpful in its own way. believe me...if you're confused, you're not alone. most loan officers these days are, too.
LOL at George... that last sentence summed up a lot of problems didn't it.
I agree with George. The only way to know how much a buy down will cost is to ask your lender. Each has different pricing and there is no formula.
Good Luck
Brian
I agree with George. The only way to know how much a buy down will cost is to ask your lender. Each has different pricing and there is no formula.
Good Luck
Brian
You can get a general idea by looking at MBS price levels. Unfortunately this blog site does not allow posting of site names but you can Google “MBS prices†and take what is likely the first listing.
Bear in mind that the prices shown are net. Minimum service fee is 25 bps so a 6.00% pool would have mortgage rates starting at 6.25%. When you go above the ¼ point mortgage rates, buyup/buydowns come into play and you will not be able to see these. Nonetheless it will give you an idea of what stepping down a full ½% will cost plus or minus. A final warning -- these are "immediates" (I think) and different coupons will have different "drops" between months.
Bear in mind that the prices shown are net. Minimum service fee is 25 bps so a 6.00% pool would have mortgage rates starting at 6.25%. When you go above the ¼ point mortgage rates, buyup/buydowns come into play and you will not be able to see these. Nonetheless it will give you an idea of what stepping down a full ½% will cost plus or minus. A final warning -- these are "immediates" (I think) and different coupons will have different "drops" between months.
Hello Favors, Welcome!
There are different types of buydowns...you don't mention which you mean. Are you asking about a buydown for the full term of the loan? If so the easiest way to find out is check with the lender. This generally costs you a lump sum (cost is determined be the lender) paid up front.
Here's an example of another type:
I hope this helps.
:wink:
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There are different types of buydowns...you don't mention which you mean. Are you asking about a buydown for the full term of the loan? If so the easiest way to find out is check with the lender. This generally costs you a lump sum (cost is determined be the lender) paid up front.
Here's an example of another type:
I hope this helps.
:wink:
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Well, you ask a legitimate question on this site and you get a con job. At least she has a smiley face!
The interest rate is not “bought down†– the payment is on a “as if†basis. Do the math yourself and go with the actual P&I figures she gives. If the interest rate were truly “bought down†at the P&I given, the outstanding balance when shifting to the actual 6.75% note rate would be lower by $12,050!
Beware of charlatans! Completely deceptive -- I'm surprised she gives her identification information.
The interest rate is not “bought down†– the payment is on a “as if†basis. Do the math yourself and go with the actual P&I figures she gives. If the interest rate were truly “bought down†at the P&I given, the outstanding balance when shifting to the actual 6.75% note rate would be lower by $12,050!
Beware of charlatans! Completely deceptive -- I'm surprised she gives her identification information.
Guest, I usually don't deign to play these games but I feel I must point out that you are too ashamed to identify yourself.
BTW, the term buydown indicates you are paying for something, not getting it for free.
BTW, the term buydown indicates you are paying for something, not getting it for free.
Don't let an annonymous poster get to you Lynette. The poster obviously doesnt know the business or have a clue for the purpose for a 3-2-1 buy down.
It is a great option in the right situation.... ESPECIALLY if the seller will pay it for you.
Unidentified troll go crawl back under your bridge and leave the mortgage business to those that have done their homework
Signed
Not Afraid to Show my Face
It is a great option in the right situation.... ESPECIALLY if the seller will pay it for you.
Unidentified troll go crawl back under your bridge and leave the mortgage business to those that have done their homework
Signed
Not Afraid to Show my Face
LOL and i mean that. Brian and Lynnette, you gave me reason to smile and to laugh.
i'm another not afraid to show my face - those of us who stand behind what we say will do so. i am definitely in agreement - a buydown can be a favorable situation, and i think our guest may not understand the concept thoroughly. of course, this may just be a disgruntled consumer - we do get those on here as well.
oh well...i hope guest gets over his or her hurt, and i am certain that you, Lynette, will also get over the accusation that you're some kind of charlatan; well, at least guest has a gift of gab.
i'm another not afraid to show my face - those of us who stand behind what we say will do so. i am definitely in agreement - a buydown can be a favorable situation, and i think our guest may not understand the concept thoroughly. of course, this may just be a disgruntled consumer - we do get those on here as well.
oh well...i hope guest gets over his or her hurt, and i am certain that you, Lynette, will also get over the accusation that you're some kind of charlatan; well, at least guest has a gift of gab.
Thank you Brian & George.