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Unlocking the Power of Buydown Mortgages: A Game-Changing Strategy for Buyers and Sellers

June 27, 2023 by Kevin Martini

In today’s real estate market, having a well-planned mortgage strategy is crucial for buyers who want to stand out and increase their chances of getting their offer accepted. Logan Martini with the Martini Mortgage Group offers a game-changing mortgage strategy allowing buyers to control the transaction and set the pace. One of their advanced strategies is the buydown mortgage, which offers immediate savings and introduces a new dynamic to property transactions.

A buydown mortgage involves the seller contributing funds to lower the buyer’s mortgage interest rate. This unconventional approach benefits both the buyer and the seller, satisfying the buyer’s desire for a lower cost while allowing the seller to maintain the sales price and maximize profits. It transforms the transaction into a win-win situation for both parties.

There are two types of buydowns: temporary and permanent. A temporary buydown lasts for a specific period, usually, one to three years, during which the seller pays a lump sum to reduce the buyer’s interest rate. On the other hand, a permanent buydown lowers the interest rate for the entire loan term and requires a more significant contribution from the seller.

While requesting a seller to buydown the mortgage rate may initially seem like asking them to make a financial sacrifice, it can actually be an appealing option for sellers. By avoiding a reduction in the sales price, sellers can expedite the sale process, especially in markets where lowering the price may result in a faster sale.

Four Benefit from Permanent Buydown with Seller-Paid Points

As a primer, “Seller-paid points” are where the seller pays points to reduce the interest rate on a mortgage. One point = 1% of the loan amount paid upfront to your mortgage lender at the closing. This buys you a lower interest rate on your mortgage and a lower monthly payment. 

  1. More Purchasing Power — Paying points to reduce your rate can have 2-3 times the impact on your purchasing power vs. reducing the purchase price by that same amount. For illustration:
    • 2 points on a $500,000 mortgage = $10,000. You’d probably need to reduce your purchase price by $20,000 – $30,000 to have the same impact on your monthly payment.
    • 2 points on a $1,000,000 mortgage = $20,000. You’d probably need to reduce your purchase price by $40,000 – $60,000 to have the same impact on your monthly payment
  2. Less Interest Costs Over The Life Of The Loan  — Your total savings over the life of the loan is likely to be significantly more with seller-paid points vs. a reduction in the purchase price. It could end up being 2-3 times the impact, depending on the specifics of your situation.
  3. Easier to Qualify For A Mortgage — Your interest rate and monthly payment would all be lower with seller-paid points vs. a reduction in the purchase price. This means that your debt ratio would also be lower, and it would likely be easier for you to qualify for financing.
  4. BOTH Buyer And The Seller Get A Tax Benefit — Seller-paid points are tax-deductible to the buyer if the buyer itemizes their tax deductions. Meanwhile, sellers can deduct points paid on behalf of the buyer against their capital gain when they sell the property. The seller-paid points are considered a “cost of sale.” Please see IRS Publication 936 for more details.

Here are four ways a seller can benefit from this strategy:

  1. Their House Becomes More Affordable To a Wider Pool Of Buyers — Paying points on behalf of the buyer can have 2-3 times the impact on the buyer’s purchasing power vs. reducing your list price. That’s because most buyers use mortgage financing. In other words, instead of lowering the list price, agree to buy down the buyer’s interest rate. This increases the buyer’s purchasing power and makes your house more affordable to a broader range of buyers who may have otherwise been priced out of the market.
  2. Seller Could Save Money Vs. Lowering Their List Price — A seller would have to reduce your list price by 2-3 times the number of points paid to have the same impact on the buyer’s monthly payment. 
  3. Seller Gain A Competitive Advantage Vs. Other homes Listed For Sale — Seller-paid points could give a seller a competitive advantage in today’s changing market. This could save you the aggravation and financial loss of significantly reducing your list price to compete with other homes that may be listed for a lower price.
  4. BOTH Buyer And The Seller Get A Tax Benefit — For more details, please see IRS Publication 936 or consult with your tax professional.

How A Buyer Can Benefit From A Temporary Buydown

As a primer,

There are 3 types of temporary buydowns (e.g., 1-0, 2-1 and, 3-2-1).  

A “1-0 Buydown” is where you or the seller pay a fee at the closing to reduce the interest rate on your mortgage by 1% in year 1. This results in temporarily lowering your monthly payment and potentially making the home more affordable to a buyer.

A “2-1 Buydown” is where you or the seller pay a fee at the closing to reduce the interest rate on your mortgage by 2% in year 1 and 1% in year 2. This results in temporarily lowering your monthly payment and potentially making the home more affordable to a buyer.

A “3-2-1 Buydown” can sometimes also be used, although a 2-1 Buydown is more common. A 3-2-1 buydown is where you or the seller pay a fee at the closing to reduce the interest rate on your mortgage by 3% in year 1, 2% in year 2, and 1% in year 3.

What Are the Benefits Of A 2-1 Buydown With The Martini Mortgage Group?

A 2-1 Buydown reduces your interest rate and monthly payment during the first few years of homeownership, making the home more affordable for you. It can also allow you to benefit from owning a home now so you can start to build equity vs. waiting a few more years and continuing to rent. If the seller pays for the 2-1 Buydown, it would have a much greater impact on your monthly payment than asking the seller to reduce the list price of the home. This could be a great negotiating tool because a greater percentage of homes listed for sale in today’s market are seeing price reductions.

What Happens When The Interest Rate Goes back To Normal?

In year 3 of a 2-1 Buydown, your interest rate would adjust to its normal “note rate.” If market interest rates are the same or higher than they are today, you would just keep the loan and pay the normal payment. However, if a recession happens, as is being predicted by many economists, mortgage rates may come down again. In that case, you may be able to refinance at the then-current rates. Keep in mind that interest rates are cyclical. They tend to go up when the economy is doing well, and they tend to go down when the economy is doing poorly. 

How A Seller Can Benefit From A Temporary Buydown?

When a seller offers to pay for a 2-1 buydown it could give the transaction a competitive advantage vs. other homes listed for sale in today’s changing market. That’s because interest rates have more like riding a roller coaster than a merry-go-round in recent years, creating an affordability crisis for many potential buyers. A 2-1 buydown could also save you the aggravation and financial loss of having to significantly reduce your list price in order to compete with other homes that may be listed for a lower price.

martini factor bottom line

Utilizing a mortgage strategy such as buydown mortgage, can be a powerful tool for both buyers and sellers. By understanding and effectively communicating the benefits, buyers can enhance their purchasing power, while sellers can attract more potential buyers and potentially save on costs. Working with a Mortgage Strategist like Logan Martini from the Martini Mortgage Group can provide valuable insights and help buyers and sellers navigate the complexities of the real estate market.

raleigh mortgage broker logan martini

Logan Martini | NMLS 1591485 | Senior Mortgage Strategist | Martini Mortgage Group at Gold Star Mortgage Financial Group, Corporation | NMLS # 3446 | 507 N Blount St, Raleigh, NC 27604 | (919) 238-4934 | www.MartiniMortgageGroup.com | [email protected] | Equal Housing Lender

Filed Under: 1-0 Buydown, 1-0 Seller Paid Buydown, 2-1 Buydown, 2-1 Seller-Paid Buydown, 3-2-1 Buydown, 3-2-1 Seller Paid Buydown, Affordability, Buy a Home, buydown, buydown mortgage, Buydowns, competitive advantage, Logan Martini, Mortgage Broker, Mortgage Rates, mortgage strategy, permanent buydown, Raleigh, Raleigh Mortgage, Raleigh Mortgage Rates, Real Estate, real estate market, temporary buydown Tagged With: buydown mortgage, Buying a Home in Raleigh, Logan Martini, Martini Mortgage Group, mortgage strategy, Mortgage Tips, permanent buydown, qualifying for a mortgage, Raleigh, Raleigh Mortgage Broker, real estate market, temporary buydown

The Martini Mortgage Group Ultimate Home Buying and Mortgage Guide: Martini Buyer Guide | Summer 2023 Edition

June 11, 2023 by Kevin Martini

The Martini Buyer Guide, created by Kevin Martini and Logan Martini, is an invaluable resource for individuals and families purchasing a home. Regardless of whether you are a first-time homebuyer or have previous experience in the real estate market, crucial factors demand consideration before making such a significant investment. The Martini Buyer Guide has been curated to provide accurate and up-to-date information about the dynamic realms of real estate and mortgages.

Within the pages of the Summer 2023 edition of the Martini Buyer Guide, you will discover a wealth of informative articles that cover various aspects of the homebuying process and the intricacies of obtaining a mortgage. These articles have been thoughtfully designed to offer readers a simplified understanding of the current state of the real estate market, equipping them with valuable insights into the mortgage process and market dynamics. With the knowledge acquired from this comprehensive homebuying guide, readers can confidently navigate the complexities and make well-informed decisions when purchasing their dream home.

Whether you are venturing into the market for the first time or are a seasoned homebuyer seeking the latest industry insights, the Martini Buyer Guide is an indispensable tool to steer you through the winding terrain of real estate and mortgage markets.

The Summer 2023 Martini Buyer Guide was curated to simply explain what is going on in the real estate and mortgage markets

Senior Mortgage Strategist and Raleigh Mortgage Broker Logan Martini
martini buyer guide summer 2023 best raleigh mortgage broker

The Martini Mortgage Group’s Guide to Buying a Home and Getting a Mortgage

Below at things to consider when buying a home and a glimpse of some of the articles found in the pages of the Summer 2023 homebuyer guide:

  • WHAT IS HAPPENING IN THE HOUSING MARKET
  • THE 3 FACTORS AFFECTING HOME AFFORDABILITY TODAY
  • JUMPSTART YOUR HOMEOWNERSHIP JOURNEY WITH DOWN PAYMENT ASSISTANCE
  • WHAT PAST RECESSIONS TELL US ABOUT THE HOUSING MARKET
  • WHAT PAST RECESSIONS TELL US ABOUT MORTGAGE RATES
  • THINGS TO AVOID AFTER APPLYING FOR A MORTGAGE
  • UNDERSTANDING THE “MARRY THE HOUSE, DATE THE RATE” STRATEGY
  • MEDIAN HOME PRICE IN THE U.S BY DECADE
  • WHY TODAY’S HOUSING MARKET IS NOT ABOUT TO CRASH
  • OUTSMART SAVVY AND UNETHICAL MARKETERS

What is Happening in the Housing Market

The recent shifts in the housing market likely have you questioning their implications on buying a home this summer. To help you, the Martini Mortgage Group has identified the top three factors you should consider closely. See the full article that starts on page 4.

The 3 Factors Affecting Home Affordability

The dramatic increase in mortgage rates last year led many buyers to put their plans on hold. However, affordability is impacted by more than just mortgage rates. To understand affordability, you must look at three factors: Mortgage Rates, Home Prices, and Wages. For more information, check out the full article starting on page 10.

Jumpstart your Homeownership Journey with Down Payment Assistance in North Carolina offered by the Martini Mortgage Group

Are you a first-time homebuyer or planning an upgrade? Are you struggling to pull together that hefty down payment?

Say goodbye to your worries because the Martini Mortgage Group is here to help!

Together with the North Carolina Housing Finance Agency (NCHFA), the Martini Mortgage Group offers many mortgage products and down payment aid programs. We’re determined to make your dream of owning a home in whatever county you are in North Carolina not just affordable but downright achievable. Check out the article that starts on page 13 of the Martini Buyer Guide or check out this blog article: Jumpstart Your Homeownership Journey with Down Payment Assistance in North Carolina offered by the Martini Mortgage Group

First-Time Home Buyer Tax Credit in North Carolina

Suppose you’re a first-time homebuyer in North Carolina. In that case, you may be eligible to save up to $2,000 a year with the Mortgage Credit Certificate (MCC) offered by the Martini Mortgage Group in partnership with North Carolina Housing and Finance Agency (NCHFA). This tax credit is not just for the first year; it’s up to $2,000 yearly as long as the home remains your primary residence.

Let’s Connect

It is understandable if you are filled with questions and concerns about securing the most cost-effective mortgage and navigating the real estate maze. We’re eager to converse with you about the insights you’ve gathered from the Summer 2023 Edition of the Martini Buyer Guide and aid you on your journey to acquire your new home. Contact us at (919) 238-4934 – we eagerly await the opportunity to assist you.

Logan Martini

Logan Martini | NMLS 1591485 | Senior Mortgage Strategist | Martini Mortgage Group at Gold Star Mortgage Financial Group, Corporation | NMLS # 3446 | 507 N Blount St, Raleigh, NC 27604 | (919) 238-4934 | www.MartiniMortgageGroup.com | [email protected] | Equal Housing Lender

raleigh mortgage broker logan martini
Kevin Martini

Kevin Martini | NMLS 143962 | Certified Mortgage Advisor | Martini Mortgage Group at Gold Star Mortgage Financial Group, Corporation | NMLS # 3446 | 507 N Blount St, Raleigh, NC 27604 | (919) 238-4934 | www.MartiniMortgageGroup.com | [email protected] | Equal Housing Lender

certified mortgage advisor kevin martini

Filed Under: Applciation Process, Appreciation, Certified Mortgage Advisor, Down Payment, Home Loan, Home Loan Rates, Home Loans, Homebuying Strategies, Housing Market, Kevin Martini, Logan Martini, Marry the House, Date the Rate, Martini Mortgage Podcast, MCC, Mortgage, Mortgage Broker, Mortgage Credit Certificate, NCHFA, North Carolina Housing and Finance Agency, Raleigh, Raleigh Mortgage, Raleigh Mortgage Rates, Real Estate, Recession, Things to Consider when Buying a Home, Uncategorized, Wake County Tagged With: Buying a home, homebuyer, homebuying process, Kevin Martini, Logan Martini, Martini Buyer Guide, mortgage, Mortgage Credit Certificate (MCC), mortgage proces, NCHFA, Raleigh, Raleigh Mortgage Broker, real estate and mortgage markets, real estate market

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    Martini Mortgage Group at Gold Star Mortgage Financial Group, Corporation | NMLS # 3446 | For licensing information go to: www.nmlsConsumerAccess.org and/or www.GoldStarFinancial.com Please review our Disclosures & Licensing information | Gold Star Mortgage Financial Group Corporation has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the US Department of Agriculture or any other government agency. Equal Housing Lender. For further information about Gold Star Mortgage Financial Group, Corporation, please visit our website at www.GoldStarFinancial.com. Receipt of application does not represent an approval for financing or interest rate guarantee. Applicant subject to credit, acceptable appraisal, title, and underwriting approval. Not all applicants will be approved. Other terms and conditions apply. Contact Gold Star Mortgage Financial Group, Corporation for more information and up-to-date rates.

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