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Chicago Home Buyers And Sellers Are Buying Down High Rates

With home-loan interest rates beginning to creep toward 7% in 2023, more and more smart home buyers and sellers are considering a buydown.

“The buydown option is becoming more popular as a seller-paid incentive for buyers, even though the option always has been available in the mortgage market,” noted veteran Realtor Sara Benson, president of Benson Stanley Realty in Chicago.

Some sellers and developers are offering a popular “2-1 Rate Buydown” which gives buyers a lower interest-rate for two years and then the loan settles into a higher permanent rate in year three, Benson said. “Typically, the rate is two percentage points lower during the first year and one percentage point lower in the second year,” Benson said.

The 2-1 buydown can be a good deal for home buyers if they will be able to afford the higher monthly payments once they begin. If rates move lower in year three the borrower has the option to refinance.

“A borrower purchasing a $500,000 single-family home on Chicago’s North Side with 20% down payment can ask the lender for the option of lowering the interest rate 1 percentage point on his or her $400,000 mortgage by paying points, or special loan fees,” said Jeremy Rose, partnership branch manager of Guaranteed Mortgage in Chicago.

“If the going interest rate is 6.4%, it would cost $3,073.80 in lender fees to buydown the loan interest rate to 5.4%. And, the points typically can be rolled into the mortgage amount,” Rose explained.

On December 29th, Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year fixed home loans rose to an average of 6.42% nationwide from 6.27% a week earlier. A year ago, the 30-year fixed loan average was 3.11%

The 15-year fixed mortgage rate average on December 29th was 5.68%, down slightly from 5.69% a week earlier. A year ago, the 15-year averaged was 2.33%.

The survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit.

“The housing market remains in the doldrums with declining sales, inventory and prices,” said Sam Khater, Freddie Mac’s chief economist. “The declines in sales and deceleration in home prices began swiftly earlier in 2022 but have moderated more recently.”

While the intensity of weakness is moderating, the market continues to decline and forward leading indicators suggest housing will remain weak throughout the winter, Khater said.

Faced with that gloomy outlook for the 2023 residential housing market, it is no wonder that Realtors, developers, lenders, sellers and buyers are jumping on the incentive bandwagon.

A spot survey by the Home Front column found the following current rate-buydown incentives offered in Chicago:

  • 130 N. Garland. At year’s end, the seller is offering $20,000 cash toward the buyer’s interest-rate buydown, or $20,000 cash payment to cover closing costs. The luxury 52nd-floor Loop condominium overlooking Millennium Park is priced at $2.275 million. The motivated seller also will pay a 3% co-op brokerage fee to the buyer’s realty agent.

  • 144 W. Erie. This 3-bedroom, 3.5-bath, 2,950-square-foot new construction penthouse in the Gold Coast is listed for $2.65 million. The developer, Erie LaSalle Venture, is offering a 2-1 interest-rate buydown plus a commission bonus of $10,000 paid to the buyer’s broker.

  • 1424 W. Walton. The seller of this 2 bedroom, 2 bath condo in West Town with a list price of $525,000 is offering a 2-1 interest-rate buydown. The mortgage interest rate would slide below market for two years depending on the size of the buyer’s down payment.

  • 2236 W. Charleston. The seller of this 3 bedroom, 2.5 bath single-family home in Wicker Park with a list price of $875,000 is offering a flat closing-cost credit of $20,000 that can be used as an interest-rate buydown.

  • 3130 N. Sawyer. The seller of this 5 bedroom, 4 bath single-family home in South Avondale with a list price of $999,900 is offering a 2-1 interest-rate buydown pegging rates at 4.99% in the first year and 5.99% in the second year. The rate levels off at 6.99% in year three.

  • 3642 N. Artesian. This new construction 5-bedroom, 4-bath, plus 2 powder room single-family home in the hot St. Ben’s neighborhood is listed for $1.549 million. The builder is offering a 2-1 rate buydown with a guaranteed 4.75% interest in the first year.

Although the buydown fees put money in the lender’s pocket, Rose asks: “Why pay big bucks for a lower rate now when interest charges likely will come down in six months or a year? Borrowers always have the option to refinance.”

For more housing news, visit Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit


“The book is Escaping Condo Jail by Sara Benson and Don DeBat. I would say that anybody thinking about buying a condo, or even anybody serving on a condo board, or anybody who has any connection to a condo, this is must reading—all 600 and something pages. Thanks a lot for a great book!”


Steve Sanders, “Your Money Matters” WGN TV, December 22, 2014

By Don DeBat

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