Sellers - Types Of Buydowns
Temporary Interest Rate Buydowns come in all shapes and sizes.
3-2-1 , 2-1 , 1-0, 1-1-1… six month intervals, one year intervals…
THIS CREATES OPTIONS FOR OUR SELLERS!
For Example: If a buyer is approved for a mortgage of $300,000 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 for a mortgage amount of $300,000.
(5.99/$1,000 Borrowed for Principal & Interest)
3-2-1 BUYDOWN
| Year 1 | 2.99% | ($4.21/$1,000) | The buyer pays $1,263/month the first year. |
| Year 2 | 3.99% | ($4.76/$1,000) | The buyer pays $1,430/month the 2nd year. |
| Year 3 | 4.99% | ($5.36/$1,000) | The buyer pays $1,608/month the 3rd year. |
| Year 4 | 5.99% | The buyer pays $1,796/month - year 4 through 30. | |
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.($13,053 in the above example.)
The following chart demonstrates a few buydown options that sellers may offer. The seller credit at closing funds the payment subsidy account to buydown the buyer’s monthly mortgage payment in the initial years.
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Payments by Borrower and Payments From Seller-funded Escrow Account on a $100,000 Mortgage at 6.5% With 3-2-1, 2-1 and 1-0 Temporary Buydown |
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|
Year |
Payment Received by Lender |
3-2-1 Buydown |
2-1 Buydown |
1-0 Buydown |
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|
Payment by Borrower |
Payment From Escrow |
Payment by Borrower |
Payment From Escrow |
Payment by Borrower |
Payment From Escrow |
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|
1 |
$632.07 |
$449.05 |
$183.02 |
$506.69 |
$125.38 |
$599.56 |
$64.28 |
|
2 |
$632.07 |
506.69 |
125.38 |
567.79 |
64.28 |
632.07 |
0 |
|
3 |
$632.07 |
567.79 |
64.28 |
632.07 |
0 |
0 |
0 |
|
4-30 |
$632.07 |
632.07 |
0 |
0 |
0 |
0 |
0 |
|
SELLER CREDIT |
$4,472 |
$2,276 |
$771.36 |
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Next: Payment Calculators 
