For Buyers
When buyers fall in love with a home but the monthly payment feels like a stretch, most people assume the only answer is a lower price. It is not. A rate buydown can put far more money back in a buyer's pocket each month than a price cut of the same size, and it is worth understanding before you write an offer or walk away from a home you love.
Here is the math on a typical loan of $600,000. A price cut of $10,000 sounds like a lot of money, and it is, but spread across a thirty year loan it lowers the payment by only about $55 a month. Now take a similar amount of money and put it toward a rate buydown instead. About $14,200 into a buydown can lower the payment by roughly $785 a month in the first year. To get that same monthly relief from a price cut alone, the price would have to come down by about $113,000. That is how powerful the buydown is compared with the cut.
This matters right now because rates have finally started to ease. The thirty year fixed rate came in at 7.32 percent in the Freddie Mac survey released on October 22, down from 7.40 percent the week before. A lower rate helps every buyer a little. A buydown helps one buyer a lot, on the home they actually want.
A buydown can be paid by the buyer, but it can also be part of the negotiation. In a softer market, a seller will sometimes agree to fund a buydown instead of cutting the price, because it costs the seller far less than a big cut while giving the buyer the monthly payment they need. It is one of those rare tools that can genuinely help both sides reach yes.
Every home and every loan is different, and the right move depends on how long you plan to stay and what the seller will consider. If you are looking at a home and the payment is the only thing holding you back, call me before you give up on it. We will run the real numbers together, the same careful way, whether the home is one million or twenty million.
Simon Sahi, Real Estate · Peninsula (650) 274-1134 · South Bay (408) 389-6939 · simonsahi.com
