it's a crazy real estate market right now here in Maryland, so I've been floating around the idea of taking closing cost assistance in exchange for a higher offer price
I've heard of the reverse in a buyer's market, when a buyer needs assistance, but the seller wants a higher offer price to compensate. I'm aware of the implications if the house doesn't appraise for that higher amount. But what are the other implications?
We know it will affect the down payment, some of the closing cost: any fees based on the loan amount, transfer tax, and possibly property tax (if anyone can clarify how recent sale prices influence tax assessed value, let me know). What are we missing?
For example, ~$550k purchase, 4.25% mortgage rate, I've calculated that a $10k closing cost assistance and $10k increase in offer price has a break-even rate of 16.5 years, not even calculating investments of that money. That is, the $10K higher price yields $38.95 extra per month at same rate, and eats up that $7.8k (subtracting increased downpayment, lender fee, and transfer tax) in 16.5 years. With even a 2% return on that $7.8k, you'd always come out ahead with the upfront money. And we would invest as we don't need help. We could even go $15k or $20k higher offer with the $10k closing cost assistance as we definitely would invest, which may finally put us i line with some of the other offers.
For comparison, buying up or down points on navyfed typically appears to have a 2.8 year break even point when getting a credit (for higher interest rate), lower being worse. When going in the opposite direction, 8.5 year break even point when paying to buy down the rate, higher being better in this case.
I've only ever seen this discussed in terms of the seller asking for a higher offer price to offset closing cost help, never in this way. So what am I missing here?
I threw in some formulas here which you can throw in python ( here's a web interpreter )
Submitted March 22, 2019 at 12:42AM by robobub https://ift.tt/2ulr4zc
