Buy-Down

[Albert Chan]

(10-26-2023 12:46 AM)SlideRule Wrote:  The builder agrees to buy down the loan to 12 percent for 3 years.

Problem is this phrase has many interpretations!
Cost to builder depends heavily on loan balance distribution.

My 1st post assumed buyer payments are all the same.
--> pmt lowered, from 1264.44 to 1176.16, for 30 years
--> builder paid for buy-downs = $6982.04

My 2nd post assumed buyer payments jumped after 3 years.
--> pmt = 1015.12 for first 3 years, 1264.44 for 27 years.
--> builder paid for buy-downs = $7192.20

(10-27-2023 12:55 PM)SlideRule Wrote:  Payments by the buyer to the lender will drop from $1264.45 to $1028.62.

Above quoted number, $1028.62, is based on something else entirely.
Payments assumed 12% rate for 30 years! Very sneaky!

lua> tvm(30*12, .12/12, 100e3, nil, 0)
-1028.6125969255042

lua> tvm(3*12, .15/12, nil, (1264.44 - 1028.61), 0)
-6803.051065027908

--> builder paid for buy-downs = $6803.05

Finanical people pick the interpretation with least cost for them! What a surprise!
This is why I ask for *walk out* price. (I don't care who paid what ...)