Seller Paid Closing Cost Good or Bad?
February 15th, 2009 Categories: Buying
Advice for Salt Lake Home Buyers
Seller paid closing cost is it really good for the buyer? Let’s look at an alternative, increasing the interest rate and financing less after all rates are incredibly low.
Assumptions $200,000 Loan, interest rate is 5.25% and closing cost is $6,000.
To have the seller pay, you would have to increase the loan amount by $6,000
I say it is better to increase the rate, let the lender pay the closing cost and owe less money. Look at the table below and see for yourself.
$206,000 5.25% Payment $1,137.54
$200,000 5.75% Payment $1,167.15
I would rather have a payment that is $29 higher and owe $6,000 less. I know the argument of over 30 Years, but at $355.32 per year your breakeven point would be 16 years. The statistics say you will live there 7 years, if that were true that $6,000 would cost you $2,487.24 giving you a $3,512.76 savings.
Besides that, not asking for closing cost makes you appear as a stronger buyer and more appealing to a seller and could actually save you a little more money than just the closing cost. Seller’s aren’t just looking at the bottom line as important as it is, equally as important a buyer that can close.
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