All Forum Posts by: Nicholas Covington

@Andy T. Basically it an option where the seller is technically prepaying your mortgage interest for you. So if the normal rate is 7% and the new buydown rate is 5% the first year and 6% the second year, the savings per month from the difference at each rate is paid upfront by the seller for you.  I find if you're not getting closing costs paid by the seller for the buy down AND normal costs, then it's really just kind of smoke and mirrors. 

If the seller-paid buydown is 8k, hypothetical numbers, and that is all you can negotiate, and your closing costs are 8k... You are still 8k out of pocket if you take the buydown. So the question just becomes do you want to write a check for 8k at closing just for a lower payment or do you want to keep your 8k in pocket? We can say it's "less interest," but since interest is front-loaded in a mortgage, you're still paying a large chunk regardless.

The short-term lower rate doesn't always mean better savings because at the end of the day, you will still be keeping the mortgage and there is no proof that rates will actually be lower in the next 1-2 years. Plus if you get the opportunity to refinance then it kind of gets irrelevant.

Not saying the option is a bad one, but there is more to the numbers that you might have to consider if you are not getting money outside of just the buydown.

If its not going to debt service then you will likely need a hard money loan to buy the property. That will go for around 10-13% and expect to pay points. That is how most people get paid and also offset some of the risk and pay the originators.

You can do a DSCR loan which normally allows you to close in a LLC.

As a lender that works with many investors, alot of my people are offloading their properties at this point just to get their cash. You're right it's very difficult to cash flow at this time with today's rate. 

Regarding the 12-month rule, you can get a DSCR loan that is offered for rental properties. Most lenders require normally 3-6 months instead of 12.

Likely any lender offering to finance for a primary residence is going to require 6 if not 12 months of seasoning on title for you to cash out on the property. If you're just looking for options to get out of the loan, say hard money, then you can do that easy as long as you just qualify for the new loan.

There are still options out there for under or around 8% on 30-year fixed terms. Where is the property located?

10-year arms aren't as competitive as people think due to what they are tied to. Likely wont find anything in the 6s.

Our DSCR loans for 30 year are around 7.325% with buy down options.

Wh is the lender offering these terms? Is this just a conventional mortgage?

What's the purchase price? 5-I 8 units should be pretty simple to find as that's where most of my lenders draw the line for anything over 4 units.

Not sure why I missed the LLC one... duh! Good extra ones. Thanks Robin!