Realtors - Benefits of Buydowns
Buydowns
For Example: If a buyer is approved for a mortgage at 5.99% and the seller offers to subsidize a 3-2-1 Buydown, the following scenario is created:
5.99% Current 30 Year Fixed Rate (5.99/$1,000)
3-2-1 BUYDOWN
| Year 1 |
2.99% |
( $4.21/$1,000 ) |
| Year 2 |
3.99% |
( $4.76/$1,000 ) |
| Year 3 |
4.99% |
( $5.36/$1,000 ) |
| Year 4-30 |
5.99% |
|
The 3-2-1 buydown creates the most substantial reduction in the borrower?s payment in the first year, but also requires the largest seller credit.
Temporary Interest Rate Buydowns come in all shapes and sizes.
This chart demonstrates a few options that sellers may offer. The seller credit funds the payment subsidy account at closing.
321Advantage.com … CREATIVE SOLUTIONS for YOUR SELLERS & BUYERS
This chart shows the cost of a 2-1 Buydown based on the Loan Amount as well as the borrower?s actual payment at: 4.5% (Year 1), 5.5% (Year 2) and 6.5% for years 3 through 30.
Cost of 2-1 Buydown
This chart depicts the cost of a 2-1 buydown based on the loan amount as well as the borrower’s actual payment at 4.5% (Year 1), 5.5% (Year 2), and 6.5% for years 3 through 30.
|
Year 1 |
Year 2 |
Year 3-30 |
|
| Loan Amt. |
4.5% |
5.5% |
6.5% |
Cost of 2-1 TBD |
| $300k |
$1,520 |
$1,703 |
$1,896 |
$6,827 |
| $400k |
$2,026 |
$2,271 |
$2,528 |
$9,103 |
| $500k |
$2,533 |
$2,839 |
$3,160 |
$11,379 |
| $600k |
$3,040 |
$3,406 |
$3,792 |
$12,655 |
| $700k |
$3,546 |
$3,974 |
$4,424 |
$15,931 |
| $800k |
$4,077 |
$4,542 |
$5,056 |
$18,207 |
| $900k |
$4,560 |
$5,110 |
$5,688 |
$20,483 |
| $1.0M |
$5,066 |
$5,678 |
$6,320 |
$22,759 |
| $1.5M |
$7,600 |
$8,516 |
$9,481 |
$34,193 |
This chart shows the cost of a 3-2-1 Buydown based on the Loan Amount
as well as the borrower?s actual payment at: 3.5% (Year 1), 4.5% (Year 2), 5.5% ( Year 3) and 6.5% for years 4 through 30.
Cost of 3-2-1 Buydown
This chart shows the cost of a 3-2-1 Buydown based on the Loan Amount as well as the borrower?s actual payment at: 3.5% (Year 1), 4.5% (Year 2), 5.5% ( Year 3) and 6.5% for years 4 through 30.
|
Year 1 |
Year 2 |
Year 3 |
Year 4-30 |
|
| Loan Amt. |
3.50% |
4.5% |
5.5% |
6.5% |
Cost of 3-2-1 TBD |
| 300k |
$1,347 |
$1,520 |
$1,703 |
$1,896 |
$13,416 |
| 400k |
$1,796 |
$2,026 |
$2,271 |
$2,528 |
$17,889 |
| 500k |
$2,245 |
$2,533 |
$2,839 |
$3,160 |
$22,361 |
| 600k |
$2,694 |
$3,040 |
$3,406 |
$3,792 |
$26,833 |
| 700k |
$3,143 |
$3,546 |
$3,974 |
$4,424 |
$31,305 |
| 800k |
$3,592 |
$4,077 |
$4,542 |
$5,056 |
$35,777 |
| 900k |
$4,041 |
$4,560 |
$5,110 |
$5,688 |
$40,250 |
| 1.0M |
$4,490 |
$5,066 |
$5,678 |
$6,320 |
$44,722 |
| 1.5M |
$6,735 |
$7,600 |
$8,516 |
$9,481 |
$67,083 |
Expand your Pool of Buyers.
How much would your seller have to reduce his price to achieve the same initial monthly payment that a 321 Buydown offers?
This chart indicates the price reduction necessary to create the same payment a 321 Advantage Buyer would expect during the first year of homeownership. For example a $500,000 seller would have to reduce his price by $115,810 to offer a $1,796 payment as compared to $17,889 credit to temporarily buydown the rate.
Payment Difference with 3 point buydown
This chart indicates the price reduction necessary to create the same payment a 321 Advantage Buyer would expect during the first year of homeownership. For example a $500,000 seller would have to reduce his price by $115,810 to offer a $1,796 payment as compared to $17,889 credit to temporarily buydown the rate.
| Loan Amt. |
3.50% |
6.5% |
PMT
Difference |
Price
Reduction |
Cost of 321 TBD |
| 300k |
$1,347 |
$1,896 |
$549 |
$86,856 |
$13,416 |
| 400k |
$1,796 |
$2,528 |
$732 |
$115,810 |
$17,889 |
| 500k |
$2,245 |
$3,160 |
$915 |
$144,762 |
$22,361 |
| 600k |
$2,694 |
$3,792 |
$1,098 |
$173,715 |
$26,833 |
| 700k |
$3,143 |
$4,424 |
$1,281 |
$202,668 |
$31,305 |
| 800k |
$3,592 |
$5,056 |
$1,464 |
$231,620 |
$35,777 |
| 900k |
$4,041 |
$5,688 |
$1,647 |
$260,573 |
$40,250 |
| 1.0M |
$4,490 |
$6,320 |
$1,830 |
$289,525 |
$44,722 |
| 1.5M |
$6,735 |
$9,481 |
$2,745 |
$434,288 |
$67,083 |
Next: How it works
