Should Sellers Help Buyers With a Mortgage Buydown?


In August 2023, the average 30-year mortgage interest rate hit its highest level since 2000. At 7.48%, they were nearly triple where they were during the pandemic when they reached a low of 2.65% in January 2021. Meanwhile, median home prices rose for 10 consecutive quarters beginning in fall 2020, only declining for two straight quarters to $416,100, which is still 26.4% higher than the quarter just before the pandemic.

The National Association of REALTORS® reported that existing home sales volume in July 2023 slipped 16.6% from the previous year, even as home prices rose to $406,700 from $399,000 a year ago. While many markets are still robust, others have slowed considerably. How can sellers bring more homebuyers to the table?

As a concession, the seller can offer to pay discount points to the homebuyer’s lender to help the homebuyer get a lower mortgage interest rate. Called a seller-paid mortgage rate buydown, these discount points are typically 1% of the homebuyer’s loan amount and every discount point paid reduces the mortgage interest rate by 0.25 percentage points. If the mortgage amount is $400K, a discount point would be $4,000, and the monthly principal and interest payment at 7.5% would be $2,797. A seller-paid discount point would lower the interest rate to 7.25% and a monthly payment to $2,729. Over the life of the loan, the borrower would save$24,535.

Talk to your Berkshire Hathaway HomeServices network professional about seller-paid mortgage rate buydowns and see if they can benefit your transaction.

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