813.910.8020 Apply Now

Mortgage Broker Tampa, FL | Mortgage Lender Tampa Florida | Marimark Mortgage

  • Home
  • Homebuyers
  • Homeowners
  • Realtors
  • Investors
  • About Marimark
  • Contact Us
  • Mortgages
  • Apply Now
  • Current Mortgage Rates
  • Calculators
  • Testimonials
  • Blog
  • Videos
  • Featured In
Home / Blog / Mortgages / Buydown Mortgages May Become More Popular as Interest Rates Rise

Buydown Mortgages May Become More Popular as Interest Rates Rise

July 28, 2019 By Admin

Buydown MortgagesAccording to a CNBC report published on January 7th, 2019, buydown mortgages may begin to increase as mortgage interest rates in the U.S. go up. Although it’s been an uncommon buying strategy over the last few years, buydown mortgages could make a comeback in a trickier homebuying climate.

Defining Buydown Mortgages

A buydown mortgage refers to a type of mortgage where a homebuyer pays money upfront to lower their mortgage interest rate over the life of the loan. This is sometimes known as buying mortgage points or buying down the rate. Anyone involved in the buying or selling process can buy mortgage points, but it’s most commonly done by the buyer to reduce their financial burden.

Each mortgage lender has their own rates for points, with each point representing a different percentage change to the offered interest rate. Some lenders may charge a fixed rate for points, though they often charge a certain percentage of the total loan value. Paying for one point may reduce your rate by any percentage, with the normal being around 0.15% to 0.5%.

For example, on a $200,000 mortgage, you could pay $2,000 to reduce your interest rate 0.25%. If buying a point lowered your interest rate from 4.25% to 4.00%, you would save a little over $10,000 in interest on a 30-year fixed-rate mortgage.

When buying multiple points to lower your mortgage interest rate, each point typically lowers the rate progressively less. For example, in the scenario above, buying a second point may only lower your interest rate an additional 0.125%, saving you much less in interest compared to purchasing the first point.

Buydown Mortgages Will Likely Become More Popular

The CNBC report mentions predictions by TransUnion, one of three major U.S. credit bureaus. They predict that mortgage rates will rise in 2019, which could result in more people buying points to lower their interest rate.

Buydown mortgages are not currently on the rise, as mortgage rates remain relatively low. But, with the predictions of higher mortgage rates in the future, buydown mortgages may begin to grow in popularity as buyers feel the strain.

The Impact of Buydown Mortgages on Consumers

Buydown mortgages can reduce the long-term cost of buying a home. However, the short-term cost can outweigh the long-term benefits if circumstances aren’t right. For instance, if a buyer will not be in the home long enough to break even on the initial cost of the mortgage points, there will not be any benefit. Typically, buyers should expect to break even after 3 – 6 years.

Mortgage points have a greater impact on longer-term loans. A homebuyer with a 30-year mortgage who pays points to buydown the interest rate can reduce the cost of the loan by thousands of dollars over the life of the loan.

Mortgage Interest Rate Trends and Predictions

Mortgage rates appear to be on the rise for the first time in decades. TransUnion’s predictions were partially based on the Fed’s previous decision to issue continued rate increases throughout 2019, which was ultimately put on hold until later in the year. However, the Fed already increased interest rates in 2018, which caused some effect on mortgage rates.

As the Fed increases interest rates, mortgage rates will naturally rise to compensate for the higher cost of borrowing money. If Fed interest rates continue to rise in 2019 and again in 2020, mortgage rates are likely to increase as well.

As mortgage rates increase, the cost of buying a home becomes more expensive overall. By buying down the mortgage for a lower interest rate, homebuyers, as well as homeowners refinancing their home, can reduce the overall cost of homeownership over the long-term.

Marimark Mortgage

Marimark Mortgage is based in Tampa, Florida and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.

We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.

To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application, or contact us direct.

Opt In Image
Stay Informed, It's Your Money
Marimark Mortgage Newsletter

The Marimark Mortgage Newsletter will keep you informed with important events in the mortgage industry that could impact your finances.

We especially focus on ways to save money on your current and future mortgages. And, we continually share the information we share with our clients, because we believe informed consumers are the best consumers.

Real estate agents, and other professionals in the industry, will receive an ongoing wealth of information that will help them serve their clients.

Thank you for signing up!

Filed Under: Mortgages

Opinions, estimates, forecasts and other views contained in this page do not necessarily represent the views of Marimark Mortgage or its management and should not be construed as an offer to provide financing at the rates or terms mentioned. Due to market fluctuations, interest rates are subject to change at any time and without notice. Interest rates are also subject to credit and property approval. Although Marimark Mortgage attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. Information from this page may be used with proper attribution.

Save with a Mortgage from Marimark

Whether you are buying a home or refinancing, you can save with a mortgage from Marimark Mortgage!

    Search

    Post Categories

    Testimonials

    Refinancing with Mary an absolute pleasure

     
    Refinancing with Mary has been an absolute pleasure. I have never been through the process before and she took the time to explain each step. She was prompt (had a rate locked in right away) and most importantly always answered the phone or emails almost immediately! The communication line alone made the refinancing process every bit worth it. Would recommend to anyone, and will be back for any future purchases! Bret Brennan, March 2021
    See More Reviews
    Marimark Mortgage LLC
    5327 Primrose Lake Circle
    Tampa, FL 33647-1328
    (813) 910-8020
    (866) 910-8020

    Accessibility
    Privacy Policy
    Terms of Service
    Sitemap

    Reviews

    Website Testimonials
    Google Reviews
    Zillow Reviews
    Trulia Reviews
    Facebook Reviews
    Yelp Reviews
    BBB A+ Rating

    FOLLOW US

    • ‎
    • ‎
    • ‎
    • ‎
    • ‎
    • ‎
    Marimark Mortgage is a BBB A+ Accredited Business

    Recent Posts

    • FHA Announced a 30-Basis Point Reduction to Annual Mortgage Insurance Premiums
    • How Can You Improve Your Credit Score?
    • Historical Mortgage Rates From The 1970s
    • What You Need to Know About Mortgage Forbearance
    • Top Tips to Save Money for a Down Payment

    © 2023 Marimark Mortgage, LLC All Rights Reserved. | Internet Marketing by Image Building Media. | RSS Feed

    Reviews / Recommendations: Google, Zillow, Trulia, LinkedIn, Facebook, Yelp, BBB

    Licensed in Florida by the Office of Financial Regulation, Mortgage Lender License #MLD77.
    Licensed in Virginia by the Virginia State Corporation Commission, License MC#4556.
    Licensed in Pennsylvania by the Department of Banking and Securities, License #40222.
    NMLS#248318 – www.nmlsconsumeraccess.org.