Interest Rate Buy Down
Reduction In Price Or Permanent Interest Rate Buy Down
3% Reduction in Price (21,000)
700,000 purchase price 79,000 purchase price
70,000 (10%) down payment 67,900 (10%) down payment
630,000 loan amount 611,100 loan amount
630,000 @ 6.25% P&I = 3,879 611,100 @ 6.25% P&I = 3,762
Monthly savings = $117
Interest Rate Buy Down (21,000 / 3% discount points)
700,000 purchase price
70,000 (10%) down payment
630,000 loan amount
630,000 @ 5.25% P&I = 3,478
Monthly savings compared to reduction in price = $284
Yearly savings = $3,408
5 year savings = $17,040
10 year savings = $34,080
20 year savings = $68,160
30 year savings = $102,240
Equity Reach Mortgage Solutions
Temporary Interest Rate Buydowns: How to Use to Sell OR to Purchase a Home
A temporary interest rate buy down occurs when funds are set aside by a third party to subsidize the borrowers’ payment in the early years of the mortgage.
Sellers – Houses sell much faster by advertising* lower initial interest rates.
Sellers – Home can sell for full price by advertising* lower initial interest payments.
Sellers – More buyers qualify.
Sellers – More buyers are interested.
Sellers – Advertise* and show borrowers how they save money on their monthly payment.
Buyers – Lower Initial Payments, gradually increase to the full interest rate
Buyers – No negative amortization (balance doesn’t increase)
Buyers – No risk of changing interest rates or unknown payments
All – Keep home values in the area stable. Keeping the sales prices stable helps the entire economy
It’s good for the Sellers, the Buyers, the Realtors®, and the economy. Selling houses at full price by offering a REAL reduced interest rate and lower initial payments to the borrowers helps everyone.
Seller Carry Back Options
Equity Reach Mortgage Solutions
Will Show You
How Seller Seconds Can Help Your Listings
Sell Quicker AND How You Can Qualify More Buyers!
Have you ever heard the saying “What’s old—is new?” I want to share with you how seller-seconds (or they might be called “carry-backs”, junior liens) can save deals! You can’t do it every time because the seller or builder must have equity in the property – but if they do – it’s a great tool. It not only helps sell the house, but they end up with an excellent return on their “secured” investment, and a nice tidy income stream.
Now for the buyer– if you work the numbers, it’s usually cheaper for your client to make the combined payment as opposed to paying MI.
Property can be advertised as low-down payment with NO mortgage insurance
More borrowers qualify who may not qualify for MI due to credit scores
Advertise and show borrowers how they save money on their monthly payment
Less down payment for properties in declining areas
The Seller/Builder can get their sales price instead of letting the house sit on the market
Seller/Builder end up with an excellent return on their low-risk investment (secured against real estate), and a nice monthly income stream.
Borrower Qualifying – Payment from seller carry-back must be included in borrower’s qualify ratios
“Carry-Back” Second Mortgage Requirements –
Must permit prepayment at any time without penalty
No balloon in less than 5 years (exceptions for borrowers with very high cash reserves)
Payments Monthly: Requires regular payments
Payments must cover interest due at a minimum
No negative amortization
Rate on Second: Rate must be market:
No more than 2% less than posted net yield for Fannie Mae seconds at time transaction is closed
Fixed or per ARM requirements
Adjustable Rate Second:
Rate cannot adjust more than once a year
Payment must cover interest due at a minimum
Disclosure: Terms must be fully disclosed to appraiser and lender
No Wraparounds: No combination of first with second in a wrap
$500,000 SP, Primary Residence, 700 FICO
All rates and terms of seller second are approximates & for illustration purposes only
With Seller Carry Back
80% 1st = $400,000 5.75% (30 year conforming) $2,334.00
15% 2nd = $75,000 4% (30 due in 10/Interest Only) 250.00**
5% down = $25,000 Total Borrower Payment – $2,584.00
**Seller’s Income Stream is $250 monthly, 4% return on investment, gets closer to asking price, fully secured against real estate and makes property more marketable/attractive!
With NO Seller Carry Back
95% 1st = $475,000 5.75% (30 year conforming) $2,772.00
MI* (MGIC) 25% coverage Rate – .0075 $297.00
5% down = $25,000 Total Borrower Payment $3,069.00
Seller Carry Back strategy saves the buyer $485 per month and creates a $250 monthly income stream for the seller!
Mark Frassica Mortgage & Franchise Consultant NMLS # 234713
Office: 805-202-2100Cell: 805-440-8173
Harry Bennett Jr Mortgage Advisor NMLS # 1973490
Office: 805-202-2100 Cell: 805-459-7601
|Equity Reach Mortgage Solutions Division of Golden Empire Mortgage, Inc.|
567 Camino Mercado, Suite C, Arroyo Grande. CA 93420