An interest rate buy down is a way to reduce the interest rate on your mortgage. This can be done by paying points upfront, which are then used to lower your interest rate over the life of your loan, or for a temporary period. This can help you save money on your monthly payments and make it easier to qualify for a loan.

A mortgage lender can help you navigate the interest rate buy down process to become a homeowner. Since they understand the dynamics of the mortgage industry, they will advise you on the best step to take so as to get the best program to meet your financial needs.

How An Interest Rate Buy Down Works

An interest rate buy down works by using the points you paid to lower your interest rate for a certain period. Typically, one point equals 1% of the loan amount. The most common periods are 3 years and 5 years. So, if you have a 3-year interest rate buy down, your interest rate would be lower for the first 3 years of your loan. After the buy down period ends, your interest rate adjusts to the current market rate.

Types Of Interest Rate Buy Downs

There are two types of interest rate buy downs: temporary and permanent.

Temporary

A temporary interest rate buy down is when you pay points upfront to lower your interest rate for a certain period. After the buy down period ends, your interest rate adjusts to the current market rate.

Permanent

A permanent interest rate buy down is when you pay points upfront to lower your interest rate for the life of your loan.

Advantages Of An Interest Rate Buy down

There are several advantages of an interest rate buy down:

• It can help you qualify for a loan.
• It can lower your monthly payments.
• It can help you save money on interest over the life of your loan.
• It can give you peace of mind knowing that your interest rate will not increase for a certain period.

Conclusion

If you're interested in learning more about Conner Homes’ current rate buy down programs or other programs and products available from one of our trusted lenders (Wells Fargo, Homebridge, or Caliber Home Loans), we can provide you with information on what options are available to help you apply for a loan and purchase a new home.