Does home price or interest rate save you more money?

By Nick Krautter | How to Guides

Does home price or interest rate save you more money?

October 29, 2018

Loan interest rates have been rising steadily throughout 2018.  Many experts believe this will continue for the next 12 months at least.  Something that can really help buyers and sellers both in todays market is something we call the “SELLER BUY DOWN STRATEGY”

Did you realize that you can have the seller subsidize your mortgage?  Sellers can generally contribute up to 3% of the sale price to the buyer side closing fees.  For a situation where the seller won’t come down in price to the level acceptable for the buyer, a large seller credit to pay for LOAN DISCOUNT POINTS can have an immediate impact for the buyer.  2-3% of the loan balance can often create a FIXED INTEREST RATE of about .75% below market.

For example: in a $500k purchase, the monthly payment would be improved by $110 with a $25k price reduction…. And with an $11k SELLER CREDIT – the monthly payment is improved by $211

To achieve that same payment with market interest rates, you’d have to reduce the price by $47,500 dollars!!  SO – the buyer gets to execute at the equivalent of a $47k price reduction, and the seller only has to pay $11k to achieve it.  Win Win!

Info courtesy of www.PDXHomeLoan.com

About the Author

Nick Krautter is the author of The Golden Handoff: How to Buy and Sell a Real Estate Agent’s Business which debuted number one on Amazon for mergers and acquisitions. His goal is to teach real estate agents how to grow their business and to help them later retire and benefit from their years of hard work. For the last decade Nick has been a Realtor in Portland, Oregon, where he leads a team and frequently serves as a real estate expert for the media.