Realtor Buydown REDUCE PRICE OR OFFER BUYDOWN?
Guide
OFFERING BUYER BENEFIT VERSUS REDUCING LIST PRICE OF HOME List Price of Home $400,000 Realtor suggests seller to contribute $15,000 toward buyer’s closing costs Buyer with 5% down payment=$20,000 down for loan of $380,000 Buyer Option 1=2/1 Buydown 30 year Fixed Rate-buydown cost roughly $9,000 (remaining $6,000 buyer can use to pay 1 point and toward closing costs) Rate with 1 point= 4.625% (yr.1)/5.625% (yr. 2)/6.625% (remaining 28 years) Year 1 buyer saves $482.41 per month/Year 2 buyer saves $247.09 per month then goes to traditional rate Buyer Option 2=Permanent 30 year Fixed Rate-buyer pays 2 points ($7,600) and remainder toward closing costs-current rate without buydown=6.625% Rate 5.99% with 2 points Buyer saves $157.33 monthly during 30 year term
Seller suggests to reduce home list price by $15,000 to $385,000 with no contribution to buyer Buyers 5% down =$19,250 on a 30 year Fixed Rate-buyer doesn’t have funds to buy rate down Rate 6.625% with zero points Buyer pays $66.09 more per month than option 2 at higher price with the 2 point permanent buydown. Buyer pays $388.21 more per month than they would have on year 1 and $154.45 more per month on year 2 of 2/1 buydown option Buyer has more costs at closing, since no contribution from seller Buyer’s payment is higher over the life of the loan Seller reduced price, netting the same than they would have had they offered the $15,000 incentive to buyer
EXAMPLE LOAN COMPARE 95% LTV Purchase Price Loan Amount Down Payment Rate APR% Points Loan Type:
$385,000 $365,750 $19,250 6.625% 6.687% 0 Conv. Fixed
Purchase Price Loan Amount Down Payment Rate APR Points Loan Type:
$400,000 $380,000 $20,000 5.99% 6.139% 2 ($7,600) 30 year Fixed Permanent Buydown