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Benefits of a Mortgage Buydown

August 22, 2023
Benefits of a Mortgage Buydown
A mortgage buydown is a smart tool for buying a new house; learn more about them here.

A mortgage buydown, otherwise known as an interest rate buydown, is a way to reduce your mortgage rate. You can learn more about it in the previous blog post. Ameri-Star Homes has various resources on how to save thousands of dollars on your home, from interest rate buydowns to construction-to-perm financing. What are the benefits of a mortgage buydown? 

Reasons to Consider an Interest Rate Buydown

Save Thousands of Dollars

Buydowns can save a homeowner thousands of dollars on their mortgage payments over the life of the loan. There are various types of buydowns and it’s important to explore what type buydown may best suit your current situation and long-term goals. 

You’re Buying a Primary Residence

There are some qualifications for buying discount points for your new home. A major one is that you must be building or buying a primary or secondary residence. Interest rate buydowns mainly apply to purchasing primary residences. If you are planning on building a customizable new home, then you are already on the right path to getting your discounts.

You Expect Your Household Income to Remain Steady or Increase

Some mortgage buydowns are big enough to cover the whole loan term, but smaller temporary buydown versions cover the first few years alone. If you are aiming to save on the first few years, then it makes sense to go ahead with it if you would expect to maintain or increase your income by the time the interest rate increases. You might be a couple with plans to get new, higher-paying jobs or a big raise or promotion at your current job in the next few years. You might also have the opportunity to double your salary down the road. It makes sense to settle with a temporary interest rate discount if you expect your income to grow with it.

You Expect Interest Rates to Be Lower in the Near Future

With a temporary buydown you can save money in the first few years and if interest rates drop lower you can refinance at a lower interest rate, perhaps even lower than you initial buydown rate!  Many times your lender may be able to refinance your mortgage to a lower rate with little to no out of pocket expense. 

What Type of a Mortgage Buydown Is Right  for You?

It is worth sitting down with your home builder or lender to understand your financial options more in depth. A buydown isn’t for every home – or every home buyer. Some types of loans don’t offer this feature, so you may not qualify for this option. With most things in life there are things to consider such as:

  • If you’re buying a home to live in for a long time, it’s important to understand what the regular payments will be after the temporary buydown expires, however a permanent buydown could avoid this or a refinance of your mortgage if rates drop could resolve the higher regular payment.
  • If you were expecting a raise or higher paying job that doesn’t come through you would have to pay the higher regular payment. You may have to adjust your budget or lifestyle a little. The good news is you must qualify for the higher regular payment and therefore should be able to afford the regular payment. 

Ameri-Star Homes from time to time has special limited time promotions offering interest rate buydowns at no cost to the homebuyer and is happy to be of assistance in Glen Burnie, MD!

Let Ameri-Star Homes Build Your New Customized Home!

Ameri-Star Homes was built on the idea that a home is not complete until the homeowner is 100% satisfied. That’s right, completely satisfied homeowners. Whether you want a home built on one of our home sites or on your own land, count on the same high quality from Ameri-Star. We have set out to exceed all your expectations of integrity, affordability, and customer satisfaction. Build lasting memories for years to come with Ameri-Star Homes. 

For more information, contact us today at 410-590-1000 or through our contact page. For more helpful custom home tips, keep in touch with us through Facebook, Instagram, Twitter, LinkedIn, and Pinterest!