interest rate buy down.

An interest rate buy down is where you pay money up front (usually at closing) to get a better interest rate. There are a couple of things to consider when doing an interest rate buy down. First if you do not plan on keeping the property or plan on refinancing it in a couple of years the buy down will probably not be worth the cost. With interest rates very low at the moment it would be a great time to do a buy down, because you will get a lower rate than the market is giving and the rates will most likely not drop low enough to temp you into a refi. The higher the amount of the mortgage the more money you will save with a buy down. Here is a quick example of how it works.

loan amount $150,000
term 30 years
interest rate 5.5%
payment of Principle and interest = $851.68

with everything the same but an interest rate buy down to 5% payment = $805.23

Savings = $46.45 per month

Example 2
loan amount $250,000
term 30 years
interest rate 5.5%
Payment of princple and interest = $1419.47

Wtih a 5% rate payment = $1342.05

Savings = $77.42 per month

So weigh out your options see the amount of time it will take to pay off the orginal fee to buy the interest rate down and go from there. You could also offer to pay for an interest rate buydown to attract buyers.