A permanent interest rate buydown requires paying discount points that reduce the interest rate for the life of the loan. One point is equal to .001 x Loan Amount.
A BANK MAY OFFER A 30 Year Fixed Rate:
5.5% 3.0 point
5.75% 2.0 points
6.0% 1 point
6.25% 0 points
A temporary interest rate buydown is a much greater reduction in rate and payment for the term of the buydown.
321ADVANTAGE prefers the temporary buydown:
The cost of the permanent buydown is expensive in comparison to the small difference in rate and payment it provides, especially when we take into consideration the fact that the average homeowner sells or refinances every 5 to 7 years. (60 to 84 payments).
See the charts, calculators and scenarios that demonstrate why Temporary Interest Rate Buydowns make more sense than Permanent Buydowns: http://www.321advantage.com/frequently-asked-questions.
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If you want to get a idea of how much it cost to buydown and your differences in rate my website does this. Go to http://www.amerisave.com/partner/agrego.
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