Title:
Buy More House
With A Buy Down Mortgage
Word Count:
398
Summary:
A buy down
mortgage allows you to buy more house with your income and enjoy low monthly
payments for a couple of years. With reduced payments, you can pay for move in
costs and furnishings. You also qualify for a larger mortgage due to lower
monthly payments.
Buy Down Mortgage Terms
Buy Down mortgages come in three packages. A temporary buydown loan, the most
common, starts with a discounted interest rate for one to three years that
increases to a fixed rate in yearly i...
Keywords:
Article Body:
A buy down
mortgage allows you to buy more house with your income and enjoy low monthly
payments for a couple of years. With reduced payments, you can pay for move in
costs and furnishings. You also qualify for a larger mortgage due to lower
monthly payments.
Buy Down Mortgage Terms
Buy Down mortgages come in three packages. A temporary buydown loan, the most
common, starts with a discounted interest rate for one to three years that
increases to a fixed rate in yearly increments. You pay the difference in
interest payment in an initial payout to the lender at the start of your home
loan. Some lenders will pay this lump sum, but then charge a higher interest
rate for the loan.
For example, you can have a mortgage with a 6% interest rate that is reduced to
4% the first year, then raised to 5% the second year, and finally reach 6% on
the third year. The difference in the mortgage payments for the first two years
will need to be paid to the lender at the time of settlement.
A compressed buydown mortgage works like a temporary buy down loan, but
interest rates rise every six months. A permanent buydown loan has a low
interest rate for the life of the loan, but that difference still has to be
prepaid to the financing company.
Buy Down Mortgage Benefits
The chief benefit of a buydown mortgage is that you can qualify for a larger
loan amount based on your income. This can be especially helpful if you expect
your income to increase in the near future.
In addition, initial low monthly payments allow you to pay for the many
expenses associated with buying a home. The cost of moving expenses, home
furnishings, and landscaping can quickly add up those first couple of
years.
Buy Down Mortgage Considerations
Buy Down mortgages should be considered along with other types of mortgages. In
some cases if the large initial payment was used as part of a down payment, you
may find better terms with a fixed rate or ARM. You may also find that if you
are planning to move within seven years, an ARM can give you the same low
monthly payments without the upfront cost.
No matter what type of home loan you choose, research lenders and loan terms
beforehand. Compare interest payments and base your decisions on your financial
goals.