Buying down Mortgage Rate

Sayville, NY · Member since 2021 · 126 posts · 34 votes

If you were to buy down the interest rate for your mortgage, what rates and fees would be associated with that? Would points have to be paid to buy down the interest rate?

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Jack Tulloch

Lender · Austin, TX · Member since 2022 · 474 posts · 586 votes

Evan - yes, almost every lender will offer a buy down option. An additional point at close will get the rate down around .375% as Erik mentioned. If you are fairly liquid, buying down the rate is a viable option to keep monthly payment down and improve cashflow.

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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
3y
Usually it costs 1% of the loan amount to buy down the rate. Typically it changes the rate by .25 to .375%. What you can do now, depending on your market, is negotiate a seller credit to buy down the rate for 2-3 years.
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Jack Tulloch
Lender · Austin, TX · Member since 2022 · 474 posts · 586 votes
3y
Evan - yes, almost every lender will offer a buy down option. An additional point at close will get the rate down around .375% as Erik mentioned. If you are fairly liquid, buying down the rate is a viable option to keep monthly payment down and improve cashflow.
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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
It's usually 1 point per .25% buy down. I would not recommend buying down your rate right now, wait till rates calm down and refinance
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Devin Ryan
Lender · CT · Member since 2022 · 44 posts · 20 votes
3y
At this point in time, my leaning is to not buy down the interest rate. The current market has been showing signs of cooling, and rates have come down a bit over the last three weeks. Inflation data has finally started to look better (I believe even a little ahead of schedule) and the trending data shows that the rates are going to continue to fall. This all being said, of course it's not a guarantee and if you need to buy down a rate slightly to improve cash flow/ratios, of course you should consider this, just wanted to provide some thoughts.
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Devin PetersonBusiness Member
Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 677 votes
3y
Points are based off the loan amount. It is always different based off the days pricing in the market. For simplest terms, on a loan of 100K if you wanted to buy the rate down at a cost of .50 the equivalent of that price in dollar amounts is $500. DO NOT get this confused with .5 in RATE! There is PRICE and RATE when negotiating a buy down. Always make sure you ask your broker/lender for a pricing sheet/snapshot of rates and prices from the day you locked. This will allow you to see how far you can buy down and at what cost. The total amount of the buydown will be added to cash to close figure on the LE/CD.
Before you consider buying any rate do a quick evaluation of how long would it take to make that up front cost back in terms of your return.
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Jon Puente
Lender · Charlotte, NC · Member since 2020 · 224 posts · 221 votes
3y
Hey Evan,
If you are looking to purchase a home right now, I would ONLY consider the 2-1 Temporary Rate Buy-Down option, using seller credits to do that. You can buy the rate down a lot more with that option, than you could with a permanent rate buy down.
The ultimate goal would be do reduce your interest rate enough for the first 18-24 months and then refinance once rates come down (because they will). I would not spend your personal money right now paying points.
Great discussion!!
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