Today in my office’s sales meeting our loan consultant talked about seller interest rate buydowns. That’s when the seller pays to lower the buyer’s mortgage interest rate.
If home buyers will be living in the home for at least 5 years and staying with that loan, it can be a great deal for them since they’ll have a lower payment every month as long as they have the loan.
If home buyers don’t plan on staying in the home or staying with the loan for 5 years, it may be better to ask for the amount the seller is willing to pay for the interest rate buydown in the form of a closing credit or reduction in price.
It typically takes roughly 5 years for buydowns to pay for themselves. If buyers have the loan less than 5 years, it won’t have paid for itself, so it may be better to get the money up front. However, if buyers stay with the loan for more than 5 years, it probably will more than pay for itself. The longer the buyer stays with the loan, the better the savings!
As with any financial decision, the results will depend on your financial situation and the details of the loan buydown program. Talk with your accountant first!
Fran Bailey specializes in downtown Chicago, Lincoln Park and Lake View condos, co-op apartments and houses. She has shared home buying and selling advice since 2006 and written about over 130 Chicago high rises. To schedule showings for any listings, get a 
