April 25, 2019 at 10:56 pm #48436
I wanted to see if @southflorida or @pratik could advise. My 30yr loan is 250,611 with buydown 12,856, seller contribute 5k, lender match 10,964, principal reduction 12,389.
1. How much of a difference would my payments be if I contributed more funds to buy down the interest rate from 0.875 to 0.125?
2. Shouldn’t the MC have increased the lender match to buy down another 0.125%.
I have reached out multiple times to my MC, the office mgr, and once to CC. My CC was the only one to respond stating my MC was the best person to answer and had her CC’d on the email. Still no response from MC.April 26, 2019 at 10:12 am #48439southfloridaMember
what was the original interest rate? where are the funds coming from for the principal reduction of $12,389? you or the lender? Whatever the numbers are, I can assure you that it’s better to use your funds to buydown the interest as much as possible as opposed to reducing principal. You are going to save a lot more money on the long run. Specially if you are planning to live in that house many years.
April 26, 2019 at 12:36 pm #48445TTrumbleMember
- This reply was modified 2 years, 7 months ago by southflorida.
I’m afraid the numbers in your post don’t quite add up. How much TOTAL are YOU contributing to buy down? (No seller funds, no anticipated lender match, just funds coming from you, including any gift funds or grants you may have received.)
YOU must provide seven points ($17,543) toward buy down before lender matching will kick in, and then the match is dollar for dollar on any amount you contribute over seven points.
I’m guessing that the $12,856 and $12,389 are both coming from you, for a total of $25,245. This would only leave $7,702 for principal reduction, which is just over three points. The seller contribution is just under two points.
All totaled (buy down, seller contribution, lender match and subtracting the BOA $3,000 lender fee), you will be able to reduce the interest rate by 2.625%, bringing you down to 1.125% with a reduction of $7,702 to $242,909.
(These figures aren’t going to be to the dollar, but they’re going to be pretty darn close.)
A change of interest rate from 0.875% to 0.125% would reduce the payment around $83 per month, or $29,880 over the life of the loan and would require another $7,518 in buy down funds (but you save about four times as much over time).
Your MC doesn’t have any control over the lender match. It is automatically applied so long as you make less than 100% of the median income for the area in which you are buying and have contributed more than seven points of your own funds to the buy down.
I hope that clarifies things a bit. Still your counselor is indeed the best person to handle your question as he or she can refer to the specifics in your file, which I cannot do through a public forum such as this for security reasons.
Online Operations, NACA
April 26, 2019 at 4:13 pm #48452
- This reply was modified 2 years, 7 months ago by TTrumble.
Thanks I was trying to decide if it was more beneficial to buy down interest to the lowest possible 0.125, just stop at 0.875, or just send in more every month on the principal. I’m going to go for 0.125 since the difference could pay my phone, internet, or gas for the month.
April 27, 2019 at 10:04 am #48466
- This reply was modified 2 years, 7 months ago by PippiS.
My MC said “Bank of America do their own calculations for the buy down, the matching in not 100% your money, however if you would like a better explanation I will need to forward to the office manager.”
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