***Base example: $500K Listing Price. Potential buyer 5% down payment***
Mortgage amount $475K @ 7.50%
1. Offering a $10K reduction in price:
Buyer goes from borrowing $475K, to borrowing $465,500.
Their payment goes down by $66.43/m
Not bad, not great, but there is better!
2. Keeping sales price as is and offering a
$10K seller concession:
Now buyer can elect to spend $10K less of their money. Win!
Instead of spending less, they can elect to keep their contribution the same, and use the $10K credit to buy their rate down permanently.
Buying their rate from 7.50% to 6.875% using the seller’s $10K concession, the payment would go down by $200.86/m
3. Keeping the sales price the same and offering a $10K seller concession in the form of a 2/1 buydown:
Here’s how this works:
Year one, the interest rate and payment will be 2% less than the base rate.
That saves a buyer $624.27/m!!!
Year two, their interest rate and payment will be 1% less than the base rate.
That saves a buyer $318.95/m!!!
Year three, their interest rate reverts back to the base of 7.50%
Here’s the best part! If the buyer refinances before benefiting entirely from the $10K buydown, the excess becomes a principal reduction during the refi process!!!
Planted Local Lending | NMLS: 304737