12/08/2023
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑹𝒂𝒕𝒆𝒔 🫣
“I’m waiting for rates to come down”
It’s no secret that rates are painfully high right now. Let’s look at our options.
You could wait until rates drop. You see, the problem with that is, as rates drop, buyers increase and so does demand.
Lightbulb moment: 💡The Law of Supply and Demand. 💡Now you have competition and are competing with other buyers leading to multiple offer situations. Also, not only are you competing for the highest bid but the housing prices are higher to begin with as the market is up. So not only are you trying to win the bid, but you may have to be over asking price just to get a house. Never thought of it that way, did ya? 😜
However, like I mentioned there are options. A favorite but fairly unknown solution are rate buydowns. The glory with this is that we can ask for the sellers to pay for them in negotiations. If we apply the savings to a rate buydown instead of reduced purchase price, it could lead to a significantly reduced monthly payment and THOUSANDS of dollars of interest savings.
Let’s break down how rate buydowns work and the types of them. We will say our rate is 7% for easy numbers.
3/1 Buydown
Year 1: 4% rate
Year 2: 5% rate
Year 3: 6% rate
Year 4: 7% rate - Constant Rate
2/1 Buydown
Year 1: 5% rate
Year 2: 6% rate
Year 3: 7% rate - Constant Rate
1/1 Buydown
Year 1: 6% rate
Year 2: 7% rate - Constant Rate
You know what they say… marry the house, date the rate. Interest rates have started to gradually drop and are predicted to do so through 2024 by many experts. Buy now before you’re competing with multiple offers and refinance when rates fall. Rate buydowns are great but don’t let a great deal get by if you don’t qualify as you will likely be paying a similar note when prices rise and rates fall.
Have questions? Give me a call!
M: 731.333.4791
O: 731.924.4018
Kailey Schmidt, REALTOR®
Tennessee Real Estate Company
®