Should I buy down my interest rate?

With rates going higher you may want to consider an interest rate buy down.

How does this work?

Let's take a couple of examples starting with a current rate (estimated) of 5%.

2-1 and 3-2-1 Buydowns

The 2-1 works like this:

• Year 1: You get 2% off the rate, so you pay 3% in year 1.

• Year 2: You get 1% off the original rate, so you pay 4% in year 2.

The 3-2-1 is similar:

• Year 1: You get 3% off, so you pay 2%.

• Year 2: You get 2% off, so you pay 3%.

• Year 3: You get 1% off, so you pay 4%.

Who Does This Work For?

• A. Someone who will make more money next year than this year.

• B. Someone who will collect more rent next year than this year.

Check with your agent and your mortgage broker to explore your options on this.

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