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Mortgage buydowns grow in popularity amid high interest rates

Maine neighborhood (WGME)
Maine neighborhood (WGME)
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SOUTH PORTLAND (WGME) -- With interest rates basically doubling over the past year, a lot of homebuyers are throwing in the towel.

One expert, though, says not so fast.

John Rose at Acadia Lending Group still thinks it's a good time to buy.

"Home values have come down, so sellers are more willing to negotiate on a price and you can get back to having home inspections done and all that," says Rose, "so the ball has sort of shifted now into potentially more of a buyers market."

While buyers can't control interest rates, Rose says one tool to explore is a mortgage buydown.

"A new option that we've seen is called a 2-1 buydown where the first year the interest rate is 2% lower than the initial rate and the second year it's 1% lower than the initial rate," says Rose.

Rose says a borrower who wants a $400,000 mortgage could save over $500 a month the first year and possibly over $250 the second year.

"The great thing about the buydown too is that you can negotiate the seller to pay the closing costs for the buydown," says Rose, "So it's essentially money that would not come out of the buyer's pocket it would come out of the seller with negotiating of the contract price."

With fewer buyers out there, Rose says there's less competition and more incentive for sellers to work with you.

"Sellers are looking at these options instead of drastically dropping the price of their home, they can get creative by offering seller paid closing costs to bring in a product like a 2-1 buydown," adds Rose.

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Giving buyers a little time to see if, or when, rates ultimately come back down.

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