Whenever you hear about buydown loans again, it’s a sure sign interest rates have risen and the real estate market has slowed down.

A buydown occurs when the interest rate is “bought down”, that is, with cash to pay for a lower interest rate known as a permanent buydown or “borrowed” into the future with a higher base interest rate as in a temporary buydown. The lower interest rate, the lower the monthly payment and loan qualifying is easier. Conversely, the lower the interest rate the more it costs.

The permanent buydown buys the rate down for the life of the loan. Typically it costs one point or one percent of the loan amount to buy it down a quarter of a percent in rate. If the current rate is 6.50% for example, you can buy it down to 6.25% for about one point.

A temporary buydown is for a short, set period of time. A 2-1 buydown is most common where the initial interest rate is two percent below the base note rate for the first year and then 1 percent below the base for the second year, finalizing at the base note rate for the remainder of the term. An example would be a base note rate of 7.50% with the first year at 5.50%, the second at 6.50% ending with 7.50% for the remaining 28 years on a 30 year loan.

It can be bought down with cash and/or a higher base interest rate with revenue called a Yield Spread Premium, also known as YSP, rebate or premium pricing. Think of it as leveraging tomorrow’s higher interest rate to gain a lower one today.

Why is this important to you as a seller? It increases your pool of qualified buyers for your home. It costs you between one to three points but it is part of dealing with a slow market; either lower the price of your home or give more incentives. It is a widely used tactic by new home builders when the market softens.

Why is this important to you as a buyer? The buydown subsidizes your monthly payments to allow time for your income to catch up to the yearly increase of approximately 7.5% above the previous year’s payment. You can buy the home you want today rather than wait, or worse, buy a lesser home you really didn’t want. You get the added fixed rate security benefit knowing exactly what your monthly payment is at any time, unlike an adjustable rate mortgage. Structured correctly, you benefit at the seller’s expense.

Why is a permanent buydown not a good option on a purchase? One main purpose of the buydown is to get more people to qualify for more home. Three point cost only drops the interest rate about

Share This

The traded endowment market exists because over 100,000 people each year decide to sell endowment policy or surrender endowment.

Most endowment life insurance policies were originally taken out for 25 years, but the majority of policyholders never wait until maturity for cashing in endowment and surrender them. In many cases, the endowment policy surrender values offered by insurance companies are less than the market value. In addition, investors are keen to buy traded endowment policies as part of their investment portfolios. The market exists because there are people willing to endowment cash in and people wanting to buy them for investment purposes.

In 2003, the government estimated that about eight in ten of the endowment policies then in force were unlikely to pay off the mortgages they were taken out for. Since then, nearly 70% of those facing a shortfall have re-mortgaged, sought financial advice or applied for compensation. However, about 700,000 people had still done nothing about their endowment shortfall. The general rule is that, people must complain within three years of receiving their first “red letter” - outlining a likely shortfall - from their insurance company or lender. Under industry rules, insurers are allowed to ignore complaints made after the time bar comes into play. Specialists say that, ‘2013 will be the peak year for endowments reaching maturity’. Nevertheless, endowment life insurance policyholders now can imagine the future awaiting them and selling endowment policies on time is the best option ahead.

The endowment policy selling process starts when the owner contacts with the TEP brokers. The details are forwarded to the trader who will endeavor to beat the current endowment surrender value. This service is completely free of charge and there is no obligation if you log on to www.bestpriceendowment.com.

Every offer made by Best Price, to sell your endowments, will be higher than the current endowment surrender value offered by the respective life office. If you decide to accept the offer, you simply need to complete the acceptance form and return it to them.

After receiving your offer acceptance letter, they approach the life office to clarify the policy details. The endowment policy buyer then looks to place the policy into a portfolio with other policies. There can be anywhere between 5 and 300 policies in a single portfolio. As soon as the endowment policy is reserved into a portfolio, they will look to complete the sale as soon as possible. The Endowment selling process is as simple and secured as that if you contact an F.S.A (Financial Services Authority) authorized and regulated organisation like Integrity Financial Solutions Ltd.

For further details or selling endowment, one may contact Integrity
Financial Services. Phone: 08701 287 330/1/3
Fax: 08701 287 334/5
Email: enq@ukintegrity.co.uk

Address: Silvester House
Silvester Road
Waterlooville, Hampshire
PO8 8TD

The author has years of first-hand experience in TEP market. She is presently working to help endowment policy holders to get the best in the market.

Share This

I most definitely would not want to come across as a slimy, double-tongued and venomous rattlesnake, but those of us who have grown old in residential real estate sales are fully aware of the fact that, in this business, men are good for one thing and one thing only: to autograph a deposit check. So much so, in fact, that when I used to work for United Realty on Kingsway (that was last century), I knew an agent who emphatically refused to speak to hubbies during showings - even during listing presentations. He totally ignored them. And he was, and still is, one of the top producers in the industry.

Hubbies invariably have this peculiarity of standing in the way during showings. Sometimes we even have to waive them aside, to allow wives to engage into the metaphysical contemplation of, well draperies, or to stand in front of the kitchen stove and fantasize out loud on the forthcoming culinary delicacies they will be preparing, and subsequently dishing out to their loved halves. Which is, incidentally, the part of showings I enjoy the most: to watch hubbies running down the stairs screaming in horror and pulling out hair. No wonder men do not live nearly as long as women: the ladies do not eat what they cook - but I digress.

So, therefore, Canada Mortgage and Housing Corporation (CMHC) has now discovered the obvious, that is women (single, married, divorced and widowed) control a whopping 85 percent of all home purchase decisions, thus giving an entirely new meaning to the old, and otherwise sexist, saying that ‘a woman’s place is in the home’. In fact, even the other belief that ‘men always have the power and the money’ seems to have become somewhat - shall we say - pass

Share This