Mortgage Killer Accelerator

Strategy 19 of 107

Buyers: have the seller pay down the rate

Most predictableFrom a lower cost of the same debt

What it is

Ask the seller for concessions used to buy the rate down permanently with points, instead of a price cut.

Steps

  1. Ask the seller for concessions used to buy the rate down permanently with points, instead of a price cut.
  2. Keep paying what the higher rate would have cost; the difference goes to principal.
  3. Avoid relying on a temporary buydown: the payment rises when it ends.

Repeat: Each purchase.

Measure: Months to payoff at the bought-down rate and your planned payment.

Try it in the calculator Enter its amount in "New rate, same payment". Add a payoff goal of 5 years to see what is still needed.

Risks

  • Lenders limit seller concessions.
  • Points only pay off if the loan is kept long enough to pass the break-even.

Who it fits

Newlyweds, Single, Average household, No high school diploma, No college degree, College students

Needs

Buying a home now or soon

How predictable

Most predictable: once in place, the payoff date is arithmetic

A worked example (hypothetical, not guaranteed)

Picture a hypothetical household (newlyweds). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.

They follow the steps: ask the seller for concessions used to buy the rate down permanently with points, instead of a price cut.

Suppose it brings a new rate of 5.5% while they keep paying the old $1,896 payment. The loan would be paid off in 23 years 7 months instead of 30 years, saving about $147,106 in interest. To finish in five years, they would still need about $3,834 a month more from other strategies. That is why the five-year sequences stack several at once.

The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.

Sequences that use it

  • First-time buyer stack: Set it up at purchase: the credit certificate and a bought-down rate must happen at closing; then yearly gifts and dropping mortgage insurance at 80%.

Sources and more information

Where to get help

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