Spivey Realty Group

A creative way to get around today’s higher interest rates.

Interest rates seem to be hovering around 6-6.5% right now. From the 3-4% days, the increase in rates (while lower than late 2022) have really affected buyers’ affordability. There are a couple ways, though, for buyers to offset those higher rates and take advantage of buying real estate now.

1. Interest rate buy downs

Interest rate buy downs. What is that? When you have extra cash (or ask for seller assistance in your closing costs), you can apply that cash to “buying down the rate,” which effectively lowers your loan’s interest rate for the entire term of the loan.

2. Lender 3-2-1 or 2-1 buy down program

What that program does is allow you, as the buyer, to reduce the going interest rate by 2 or 3 whole points (aka from 6% to 4%, say) in the first year, then 6 to 5% in the second year and then in year three you would have the rate or 6%. It allows for lower payments now and in the short term and keeps the door open for a future refi when rates are lower.

The risk on that would be if rates DON’T go lower, but odds are that if they aren’t lower, they’re higher, which means locking in that 6% (at the end of the day) was a better move than waiting 1-2 years to buy. 

Thanks for reading! Until next time, Kevin Spivey

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