As Interest Rates Continue to Skyrocket It's Time to Get Creative
Well, it seems that The Federal Reserve Board (The Fed) did pretty much what was expected today and announced another 75 basis points driving rates to their highest levels since 2008. For potential home Buyers this means rates will be even higher that much sooner, and because of ongoing inventory shortages and under-building, home prices are receding but not enough to offset the higher costs of borrowing. what this means for many is that they may have to postpone their purchase yet again, but it could also mean that it's time to get creative using such vehicles as a Temporary Rate Buydown. It's not a new vehicle, just not one that's been seen in quite a while due to the lower mortgage rates we've enjoyed for the better part of a decade. Note the term "Temporary" because this is only an available option for 1-3 years, unlike buying discount points up-front to offset a higher rate. In a nutshell, the temporary buydown is accomplished by essentially subsidizing the interest rate that a borrower pays. For example, let's say a buyer gets a mortgage at a 7.5% interest rate, with a one-year buydown at 1%. That will effectively lower the monthly payments in the first year are based on a 6.5% interest rate before rising back to 7.5% thereafter. Unlike the discount point scenario, where the savings are taken over the life of the loan in smaller increments, this scenario offers a shorter-term savings platform with the costs being saved up-front before converting back to the original rate. To many, this may also sound like an Adjustable-Rate Mortgage (ARM), but it's not that either. Because the temporary rate buydown will reset to the original rate after 1-3 years, it is not truly "adjustable" like and ARM, which will continue to change periodically, in many cases throughout the life of the loan. Trust us when we tell you that having discussions and writing about ideas lie this bring us no joy because we wish the economy and mortgage interest rates were in a better place. it does give us some satisfaction to perhaps shed some light on an alternative that hasn't been seen for quite some time and it could very well help save a deal or create an opportunity to make a deal where there wasn't one before. Take this time to either begin to formulate a plan with your Lender and Realtor® or Agent, and if you already had a plan then take this time to begin making any changes needed as a result of this latest hike, but don't give up...instead fight like Hell! #realestate #interestrates #thefed #mortgagerates #temporaryratebuydown #lender #mortgagebroker #realtor #propertyguerilla #agent #buyingrealestate #sellingrealestate