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Troy Stavros' Blog

By Troy Stavros | Broker in Knoxville, TN

Is a Buydown Mortgage Right for You? by Troy Stavros, Knoxville Real Estate Expert

A buydown mortgage may be the key to affording your dream home according  to www.RelocateKnoxville.com .  There are many different types of mortgage loans available to today’s home buyer.


Permanent and temporary buydown mortgages are financial tools used by lending institutions to reduce the interest rate on a mortgage loan.  With this type of financing extra points (sometimes called discount points) are paid upfront at closing.  In simple terms, a point is equal to one percent of the principal loan amount total.  A buydown is an upfront payment.  The purpose of this payment is to enable the financial institution to lower the monthly payments.  A buydown is sometimes used as a tool to enable the buyer to qualify for a mortgage.


Buydown mortgages have many benefits. 


Temporary buydown mortgages appeal to the home buyer who has prospects for a substantial income increase in the next few years. For example a spouse may currently be in school, but upon graduation will have excellent employment prospects.  A temporary buydown mortgage allows the buyer to make lower monthly payments during the first few years of the loan.  During these years the interest rate is lower than the actual mortgage loan rate.  This results in lower monthly payments early on in the life of the loan.  Buyers with lower monthly incomes can qualify for larger loans with this strategy.  In general, a buydown mortgage allows the buyer to own more house for the money.  In some cases it is the best way to qualify for any loan because of the lower interest rate.


A permanent buydown mortgage reduces the interest rate of the mortgage for the entire life of the loan.  This reduction of the interest rate will cost the buyer several points at closing. More information about buydown mortgages is available at www.RelocateKnoxville.com .


There are many financing options available to home buyers in the Knoxville area.  Contact Southeast Home Mortgate to get expert advice for your specific mortgage needs.


Free information about buying, selling or investing in Knoxville real estate is available. To request free information about the Knoxville real estate market contact me, Troy Stavros at TalkwithTroy@aol.com .  Have questions?  Feel free to call me with your real estate or mortgage related questions at 865-599-9444.  Complete information about the Knoxville real estate market including current homes for sale, property values and more is available online at www.RelocateKnoxville.com .


By Barbara Q.,  Thu Sep 17 2009, 08:51
Troy- Great post!
Seller-Funded Buydowns are a great way to increase market potential and expand your pool of qualified buyers.
You can see the incredible savings that a temporary buydown offers with this temporary Buydown calculator:
By Dwfora,  Wed Dec 30 2009, 14:53
Although your article touches on the differences between permanent and temporary buy downs, I was wondering if there was a particular reason as to why you should or shouldn't go through with a buy down. For example, isn't it true that if you are only going to be living in your home for about 2-3 years, that it isn't worth a buy down? Or that it's beneficial to a person who has a lot of money? At least that's what I took from this article: http://www.bankapedia.com/mortgage-encyclopedia/faqs/687-what-is-the-purpose-of-a-temporary-buy-down

What do you think?
By Troy Stavros,  Wed Dec 30 2009, 19:11
Yes, I agree that there are definitely circumstances that lend to using or not using the buy down. I would recommend sitting down with a qualified, experienced mortgage consultant that can listen to your particular circumstances and give you the appropriate options. If you need a recommendation for a qualified mortgage consultant I'd be happy to give you some names.

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