Nicole Friedman
speaker
798 appearances
16 recordings
1 series
first heard Aug 2017
last heard Dec 2024
Nicole Friedman’s voice in public audio — every appearance, attributed to the second.
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Appearances
WSJ Your Money Briefing · Some Homebuyers Turning to Buydowns for Lower Mortgage Rates · 20 Dec 2022
podcast
They are unwilling to buy at the higher mortgage rates.
And so as demand has fallen, the number of sales has dropped off.
And in a lot of parts of the country, home prices are starting to come down as well.
Yeah, so there's different types of buy downs.
You know, the standard buy down is that a buyer will pay upfront some amount of money to permanently lower the interest rate on a 30-year mortgage.
But we're seeing more use these days of what's called a 3-2-1 buy down, where for the first year of the mortgage, the buyer's payment is lowered so that if an interest rate is lowered by three percentage points, so if the normal interest rate is 7% in that first year, they would pay
a 4% interest rate.
And then in the second year, it's a two percentage point decrease.
And so they would pay 5% interest rate in that second year.
In that third year, it's a 1% decrease.
So they would pay a 6% rate.
And then starting in the fourth year for the rest of that 30-year mortgage, they would pay the 7% interest rate.
It's not like an adjustable rate mortgage because the rate is known up front.
And once the temporary period ends, the rate is fixed for the rest of the mortgage.
Whereas an adjustable rate, the buyer doesn't know going in what the rate might adjust to in the future.
In this case, they know exactly what the rate's going to be after that first one or two or three years of the temporary buy down.
These are not new.
They've been around a long time.
They were not as popular last year or in previous years because interest rates were much lower.
So for many buyers, it was not needed to reduce that monthly payment to kind of make a home purchase more affordable.
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