Save on your mortgage payments with RateReduce

Over the past few months, mortgage rates have dropped to their lowest levels in several years. Still, some potential homebuyers, particularly first-time homebuyers, might be looking for additional ways to make buying a home more affordable.

At Rate, we’re committed to helping as many people as possible realize their dream of homeownership. That’s why we’ve created special loan programs designed to help buyers tackle housing affordability. Our RateReduce loan program* offers ways to save on your monthly payments***, including an option that can help home sellers make their listing more attractive to buyers. 

For more details about RateReduce, keep reading. Or you can get the mortgage process started with our online application. 

What is RateReduce?

We have created the comprehensive RateReduce program to give buyers smart and accessible options to lower mortgage payments, giving sellers a competitive edge in an ever-changing market. All RateReduce options are what’s known as a buydown.

What’s a buydown?

A buydown, like RateReduce, is what’s known as a seller’s concession. The seller of the home can contribute to the buydown to lower the monthly mortgage payments for the buyer. It’s a great way to increase the chances of selling the home by making it more attractive to buyers.

There are three different types of buydowns that are part of RateReduce:

Each of these can help both buyers and sellers land on a deal that works for them, but in slightly different ways. In the case of new construction, the builder can offer to fund the buydown. 

It needs to be included in the purchase contract as a seller concession. The amount of money that the seller or builder is pre-paying for the buydown, normally called the concession, is paid during closing.

How RateReduce Temp works

With RateReduce Temp, a temporary buydown reduces the interest rate on your mortgage for the first few years of your loan. 

We offer five types of temporary buydowns through RateReduce Temp. The most common is called a 2-1 buydown, but there’s also a 3-2-1 buydown, 1-1-1 buydown, 1-0 buydown and 1.5-0.5 buydown. They all offer a period of time with a lower rate and work similarly. 

You’ll notice that their names correspond with the periods of lower rates. For example, a 3-2-1 Buydown offers a 3% lower rate for the first year of mortgage payments, a 2% lower rate for the second year and a 1% lower rate for the third year. After the initial three years, the borrower will make payments at the note rate for the rest of the loan term.

Here’s how each option could work with a 30-year mortgage, as an example:

3-2-1 Buydown

2-1 Buydown

1-1-1 Buydown

1-0 Buydown

1.5-.5 Buydown

RateReduce Temp can be applied to many different loan products, like a 15- or 30-year fixed-rate mortgage and adjustable rate mortgages (ARMs). And you could also combine RateReduce with your FHA, VA loan**** or Non-QM. 

Get fixed savings with RateReduce Perm

As you might suspect, the RateReduce Perm is a more “permanent” version of buydown than RateReduce Temp. While the reduced mortgage rate of RateReduce Temp applies to the first few years of the mortgage, the Perm option will keep mortgage rates down over the entire term of the loan. 

Why RateReduce works for sellers

You may be wondering why a seller would agree to pay extra to provide a concession to the person buying their home. Essentially, why would a seller help with the buyer’s mortgage?

It makes sense when you compare the benefits of RateReduce Temp and RateReduce Perm to the alternative of reducing the listing price. 

The seller is able to keep their asking price the same instead of agreeing to take less on the sale of the home. They can help the borrower save over the life of their loan, sometimes for less than what it would have cost to reduce the price of their home. That allows the seller to possibly net a greater profit once the deal closes. 

The seller can use this approach to make their home more desirable to buyers, particularly if they secure the buydown before going under contract. They can do that with our third option, RateReduce Sell.

How RateReduce Sell works

The seller agrees upfront to cover the cost of the buydown, along with an upfront fee, and locks in the rate. The seller can now advertise the bought-down rate using our branded materials to potential buyers. Once a buyer is found, a purchase contract is signed and the buyer submits their application, the rate lock will be transferred to the buyer. 

The RateReduce Sell program allows a seller to secure a lock for 60 days while they search for a buyer for their home. The first 30 days are dedicated to finding a buyer, then the second 30 days allow the buyer to close the loan.

Great ways to make your mortgage more affordable

RateReduce is a gamechanger for homebuyers looking to lower their monthly mortgage payments. And with three options, this gives you so many ways to approach a seller and ask them to help close the deal. Work closely with your agent, who will know how to help share the benefits of the RateReduce program with a seller.

Start your application today to get on the path to homeownership with a reduced mortgage rate or contact a loan officer to get additional information.

*Both temporary and permanent RateReduce options are available from participating builders and sellers on select properties. Buyer paid RateReduce options are also available for qualified borrowers on any approvable property per loan product restrictions.
 ** Sellers may sign a RateReduce Sell Agreement with Rate to secure a 60-day rate lock on seller's departing residence by paying an upfront fee (higher fee for high balance loans): rate will be locked for 60 days; giving the seller 30 days to secure a buyer and the buyer 30 days to close the loan. Seller is required to contribute seller-paid points which must be applied towards a permanent rate buy down only. The seller must make a minimum buydown contribution of 2% and could elect up to a 9% buydown contribution subject to applicable state and federal laws, product guidelines, and future product eligibility if changes occur prior to closing. Upfront lock fee may be refundable if the buyer's loan closes. If the lock expires, is cancelled, or if the borrower withdraws and a new borrower is not found within the lock time parameters, then the upfront fee will not be refunded to the seller. Eligible for fixed rate, purchase transactions only. Seller must acquire a binding purchase contract for departing residence. Minimum FICO score and down payment requirements apply. Applicants subject to credit and underwriting approval. Buyer's interest rate may be higher depending on their qualifying information. Additional restrictions apply.

***Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Rate for current rates. Restrictions apply.

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply.

****Rate is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the Nevada Department of Veterans Services, the US Department of Agriculture, or any other government agency. No compensation can be received for advising or assisting another person with a matter relating to veterans’ benefits except as authorized under Title 38 of the United States Code.