This was the headline in a first page story in the Denver Post on Saturday as interest rates rose another ¼% last week to 5.25% according to Jerry Kaplan EVP at Cherry Creek Mortgage. However, many consumers still think rates are about 4.75% and that’s not true anymore. I know our rates are up ½% since September 7th which is equal to a 5.50% price increase on a home. Ouch! As I have said thousands of times waiting seldom pays off.


So, what’s a solution? An interest rate buydown is an option. I prefer the seller paid 2/1 Buydown in which the seller pays the interest cost at closing for the buydown. For example, the buyer’s loan amount is $350k. A normal 30 year fixed rate is now 5.25%. With a 2/1 buydown the rate would be 3.25% the first year and 4.25% the second year. Then, from year 3 to 30 the rate would be 5.25%.


On a $350k loan this would save the buyer about $410 a month for the first year and $210 a month for the second year. The total cost to the seller is about $7500 paid at closing or roughly 2.125% of the loan amount.


So, instead of dropping the price on your listings consider this option instead as a buyer’s pain is the monthly payment and your sellers can help alleviate this pain for the first 2 years.


Here’s a link to the Denver Post story–