Rates stink. Now what?

DANIEL FISCHPAN | SPECIAL TO THE JEWISH NEWS

We can always perseverate on problems outside of our control. It is far better to find solutions to problems within our control. Thirty-year fixed mortgage rates are at 20-year all-time highs. While we cannot control mortgage rates, we can control how we negotiate a real estate transaction. Here are three ways to lower your interest rate on your mortgage:

1. Buydown programs

A buydown allows a buyer to have a reduced mortgage rate for a period resulting in a reduced monthly payment. The duration is usually one to three years. There are many different types of buydown programs. The most common one is called a 2-1 buydown. The seller of the property will pay for this cost through a seller concession. Seller concessions are written into the real estate contract when making an offer. The example below will require the seller to pay $11,182.68 in seller concessions.

If you are buying a $600,000 mortgage with a 20% down payment, your loan amount will be $480,000. As of June 1, 30-year fixed mortgage rates were 6.99%. That means your monthly principal and interest payment would be $3,190. With a 2-1 buydown, the mortgage interest rate will be 4.99% for the first year, 5.99% for the second year and 6.99% for years three through thirty. The table below shows how much you will be saving a month during the 2-1 buydown program.

Solar statistics in Arizona

As of May 2023, the average cost of solar panels in Arizona is $2.64 per watt making a typical 6,000 watt (6 kW) solar system $11,071 after claiming the 30% federal solar tax credit now available.

This is lower than the average price of residential solar power systems across the United States which is currently $3.00 per watt.

If you got the seller concession, which option should you pick?

It depends. If you think mortgage rates are expected to go down over the next two years, then it is better to select the buydown program. If you are unsure where rates are going, or you think rates will continue to rise, then buying down the rate for the full 30 years makes more sense.

According to data from the Solar Energy Industries Association (SEIA):

• Arizona’s national ranking: 5th (7th in 2022)

2. Buy down the rate for all 30 years important in summer, particularly during the monsoons when dust storms and heavy winds hit the area and can quickly turn your pool into something resembling a swamp. By the way, a green murky pool invites mosquitoes and most importantly is a safety hazard. If someone falls in and sinks to the bottom, they may not be visible until it’s too late.

That way you can spend more time this summer enjoying the cool, refreshing beauty of your pool. The cost of pool service can range greatly due to the size and complexity of a pool. A tiny backyard spa would require minimal attention, whereas a negative edge pool or a pool with slides and special water features can be more costly.

The buydown programs have something unique that buying down the rate for the full 30 years does not have, an escrow account. When you buy down the rate with seller concessions for all 30 years, that money is gone after closing. You will never see it again. Conversely, seller concessions used for a buydown programs goes into an escrow account. Every month a portion of those funds are used until the buydown program ends.

While it is nice to have reprieve of lower monthly payments for two years it may be nicer to have it for the entire life of the mortgage. If you take the $11,182.68 and put it towards buying down the rate, your new rate would be 6%. That is a monthly principal and interest payment of $2,878. This saves you $312 a month for the life of the loan. Not all seller concessions are this large. You may get $5,000 in seller concessions, which could be used towards closing costs or buy down the rate to 6.499%.

• Homes in the state powered by solar: 974,221 homes

This matters because if you decide to refinance to a better rate while still in the buydown program, the unused funds from the seller concession will come back to you in the form of a check or reduction in principal balance. JN

• Percentage of state's electricity from solar: 9.86%

• Solar companies in Arizona: 368 (76 manufacturers, 171 installers/developers, 121 others)

After completing his MBA in finance, Daniel Fischpan moved from New Jersey to Scottsdale to focus his energy in helping people navigate through the mortgage process at Modern Home Lending in Scottsdale where he is a loan officer. For more information, contact him at 480-300-2829 or daniel@ modernhomelending.com.

3. Buy down the rate yourself

10. Automated pool cleaners

An automated pool cleaner can help you by vacuuming your pool daily. Whether you clean your pool yourself or hire professional a pool service company, it is important to clean the pool and monitor the chemicals on a weekly basis.

Either way, whether you go the DIY route or hire a professional, start the process now so you can enjoy the pool sooner than later, and more often. JN solar co-op in Phoenix, as I hear from more and more people looking for help navigating the process of going solar,” said Adrian Keller, Arizona program director for SUN. “I’m particularly looking forward to helping folks access our Solar Energy Assistance Program, so that families for whom the financial burden is just too high can also share in the benefits of power from the sun.”

As negotiations go, you may or may not get any seller concessions. In that case, you can pay out of pocket to lower your rate. A mortgage broker can provide you with different rate options. The following chart is an example of those rate options. As mortgage rate drops, so does the monthly payment. However, the cost to buy down the rate goes up.

One of the top 50 Realtors in Phoenix/Scottsdale as voted by Phoenix Magazine! BUYING?

She said it took about eight months from when she signed the contract until going “live” using the panels and her battery. The hold up was due to supply chain issues and other delays with Salt River Project (SRP) and the city of Scottsdale.

Thanks to this year’s partnership with the City of Phoenix, the co-op will have funding available to help 10 low-income families install a six-kilowatt rooftop solar system (a standard household system size) at no cost.

“Phoenix has more solar per capita than any other big city, and we’re proud to connect even more residents to this cost-saving, sustainable resource through this program,” said Phoenix Mayor Kate Gallego in a statement. “The co-op

AmyRosenthalRealtor@gmail.com www.AmyRosenthal.com

Ettinger is thrilled with the outcome and said that she can run the internet, electrical outlets, refrigerator, microwave and a mini-split system (a heating and cooling system that allows you to control the temperature in an individual room) in her bedroom on the energy from the battery powered by her solar panels. She said the only thing she can’t run off the battery is her whole-home HVAC system and her washer and dryer.

“I have an app on my iPad and phone that shows me my consumption in real time and the different settings that you can activate during the year —

• Total solar investment in the state: $16.1 billion

• Prices have fallen 53% over the last 10 years

• Growth projection: 7,269 MW over the next 5 years

THIRTY-YEAR FIXED MORTGAGE RATES ARE AT 20-YEAR ALL-TIME HIGHS. WHILE WE CANNOT CONTROL MORTGAGE RATES, WE CAN CONTROL HOW WE NEGOTIATE A REAL ESTATE TRANSACTION.