We continue to get questions on temporary buy-downs and we came across a tool that gives a picture of what is potentially best for a borrower. Is it better for you to get a Price Reduction, funds for a Temporary Buydown or use funds for a Permanent Buydown?
Here is a scenario of a $400,000 price with 20% down:
The graph below shows the Cost Benefits of each scenario over 10 years.
The Graph below shows the lowest cumulative PITI payments over the course of 10 years.
SUMMARY: The summary of these is that in the short term, the temporary buydown makes the most sense and the permanent buydown wins over the course of time even over the price reduction. Thoughts to consider: If rates come down in the next 6-12 months as we expect, most folks will have an opportunity to refinance the current mortgage. If a borrower is on a temporary buydown and they have the opportunity to refinance, those funds are used to reduce the payoff so the funds are NOT lost. Those funds can essentially be used to pay for the refinance. That said, IF rates do NOT come down then the permanent buydown is the way to go.
CALL US anytime with questions, we would love to chat!
Credit for charts and information goes to True North Mortgage, Jim Roberts
True North Mortgage
505 E Plaza Circle Dr Ste D
Litchfield Park, AZ 85340