Unlock the Secret: How a Temporary Raleigh Mortgage Buydown Can Help Homebuyers

In today’s dynamic Raleigh real estate market, a classic tactic used by home sellers is gaining popularity among homebuyers: the Seller-Paid Temporary Buydown. This strategy is particularly advantageous when securing a Raleigh mortgage in a high-interest rate environment. A Seller-Paid Temporary Buydown can be more beneficial for the borrower than a straightforward price reduction by directly addressing financing costs, enhancing affordability, providing long-term financial benefits, and offering a competitive edge.

A Seller-Paid Temporary Buydown is now the go-to for homebuyers, cutting mortgage costs and boosting affordability in today’s high-interest market.

Certified Mortgage Advisor and Raleigh Mortgage Broker Kevin Martini

What is a Seller-Paid Temporary Buydown?

A Seller-Paid Temporary Buydown involves the seller paying a fee at closing to significantly reduce the buyer’s mortgage interest rate for the initial years of the loan. This approach makes homeownership more affordable upfront and provides financial flexibility.

Different Formats of Buydowns

1-0 Buydown

• Year 1: The interest rate is reduced by 1%.
• Year 2 onwards: The interest rate reverts to the original note rate.

1-0 Buydown Benefits

• Lower Initial Payments: Reduces your interest rate by 1% in the first year, making your initial mortgage payments more affordable.
• Short-Term Relief: Offers a temporary reduction in payments, providing immediate financial relief as you settle into homeownership.
• Easier Budgeting: Helps ease the transition from renting to owning by lowering your initial housing costs.

1-1 Buydown

• Year 1: The interest rate is reduced by 1%.
• Year 2: The interest rate remains reduced by 1%.
• Year 3 onwards: The interest rate reverts to the original note rate.

1-1 Buydown Benefits

• Sustained Affordability: Keeps your interest rate reduced by 1% for two years, extending the period of lower monthly payments.
• Gradual Adjustment: Provides a more gradual increase to the standard rate, helping you adjust financially over time.
• Increased Buying Power: May allow you to qualify for a larger loan amount due to the initial lower payments.

2-1 Buydown

• Year 1: The interest rate is reduced by 2%.
• Year 2: The interest rate is reduced by 1%.
• Year 3 onwards: The interest rate reverts to the original note rate.

2-1 Buydown Benefits

• Significant Initial Savings: Reduces your interest rate by 2% in the first year and 1% in the second year, offering substantial savings in the early years of homeownership.
• Seller Incentives: Encourages sellers to offer this option as a negotiating tool, which can be more impactful than a simple price reduction.
• Flexibility with Refinancing: Provides the opportunity to refinance if interest rates drop, with any unused portion of the Buydown refunded to the borrower.

3-2-1 Buydown

• Year 1: The interest rate is reduced by 3%.
• Year 2: The interest rate is reduced by 2%.
• Year 3: The interest rate is reduced by 1%.
• Year 4 onwards: The interest rate reverts to the original note rate.

3-2-1 Buydown Benefits

• Maximum Initial Savings: Offers the most substantial reduction in interest rates, with a 3% reduction in the first year, 2% in the second year, and 1% in the third year.
• Extended Relief: Spreads out the financial relief over three years, giving you more time to adjust to full mortgage payments.
• Enhanced Affordability: Can make homeownership accessible sooner by significantly lowering initial payments, which can help in competitive markets.

Are There Tax Benefits?

Seller-paid buydowns are tax-deductible for the buyer if itemizing deductions. Sellers can deduct the buydown cost against their capital gain when selling the property. For more details, refer to IRS Publication 936.

About Kevin Martini and Martini Mortgage Group

Kevin Martini, a leading Raleigh mortgage broker, and Certified Mortgage Advisor is dedicated to empowering families to build generational wealth through real estate using innovative mortgage strategies. As the founder of the Martini Mortgage Group, Kevin is renowned for his fiduciary approach, ensuring his clients’ best interests are always prioritized. With a track record of originating over a billion dollars in home loans, Kevin’s expertise helps clients navigate the complexities of financial planning to achieve their real estate aspirations.

For personalized advice and to explore how a Buydown can benefit your home buying journey, contact the Martini Mortgage Group today. Kevin Martini and his team are here to help you unlock the doors to homeownership in Raleigh and beyond.