THE SCENARIO
These first-time homebuyers spent nearly a year searching for the right home. When they finally found it and had their offer accepted, they faced a new challenge: rising interest rates had pushed the projected mortgage payment higher than they were comfortable with.
THE PROBLEM
They had enough money for a solid down payment and closing costs, yet limited cash reserves after closing.
We discussed paying points to lower the rate. However that would have depleted much of their savings. It also didn’t make much sense, as they expected to own the home for only about five years.
THE SOLUTION
Working with their attorney, we negotiated an INCREASE in the purchase price, with the seller using those funds to pay for the buyer’s temporary interest-rate buydown.
As a result, their rate was reduced by:
• 3% during Year 1
• 2% during Year 2
• 1% during Year 3
This significantly lowered their payment during the years when affordability mattered most, all without increasing their out-of-pocket closing costs.
THE RESULT
The borrowers purchased the home they loved, preserved their savings, and gained three years to adjust to homeownership before their full mortgage payment took effect.
BOTTOM LINE
Most homebuyers believe a lower payment requires a lower interest rate. That’s not always true.
Sometimes the best solution isn’t rate shopping. It’s understanding all the available strategies and selecting the one that best fits your goals, budget, and future plans!
If you’re planning to buy a home in the next 6-12 months, let’s talk NOW. The sooner we start planning, the more options we may have available to help you achieve a better outcome.
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Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, The Daily News, Anton Press, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.
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