Spooked by Rising Rates? Here’s a Way to Lower Them
Photo by Jordi Vich Navarro on Unsplash
With mortgage rates on the rise the last few months, it may feel like the ability to buy a home is slipping out of reach. However, there are always alternatives that can help. We’ve discussed other lending programs like Adjustable Rate Mortgages (ARMs) in the past, that may net you a lower rate for a shorter term. Also, our friends at Crosscountry Mortgage have Temporary Buydown program that can lower your mortgage rates for the first few years.
With buyer demand down and houses sitting on the market longer, sellers are more willing to give concessions like credits. With this program, a seller credit can go into an escrow account that in turn is used to pay incrementally against the monthly mortgage payments, thereby reducing your effective rate for a period of time.
It’s also worth remembering that these elevated mortgage rates are likely to be temporary. Fannie Mae has already indicated that rates may fall back to the 6.2% range in 2023 — and if we enter a recession, they could fall lower yet.
With this program, you could potentially keep your effective rate low until you’re able to refinance at a better rate once they’ve readjusted.
Example:
Sale price: $650,000 | Down payment: $130,000
Loan amount: $520,000 | 30-year fixed rate: 7%
Annual percentage rate: 7.075%
30-year fixed rate with Temporary Buydown paid by seller:
| Effective rate | P&I | Monthly savings | Total savings | |
|---|---|---|---|---|
| Year 1 | 4% | $2,482.56 | $977.01 | $11,724.12 |
| Year 2 | 5% | $2,791.47 | $668.10 | $8,017.2 |
| Year 3 | 6% | $3,117.66 | $341.91 | $4,102.92 |
| Year 4 and after | 7% | $3,459.57 | $0 | $0 |
Total savings and seller credit: $23,844.24
Ready to get started? Contact us, and we’ll connect you our colleague and dear friend Monica di Perna so we can get you shopping as quickly as possible.
Click the image below to download the PDF flier.
