Oktoberfest Is OUT! Winter Wonderland Is IN! – Compare 5/1 ARM to 2/1 Buydown and 1/0 Buydown

I’ve received quite a few questions about this year’s annual Oktoberfest, and I owe everyone an explanation!
Well, Oktoberfest never quite got off the ground this year because we came up with an even better idea!

Introducing Augusta Financials' First Annual Winter Wonderland!
And trust me, this won’t be your typical holiday party!
Imagine bringing your clients, their children, and their grandchildren to Augusta Financial for an afternoon of holiday fun!
We’re talking REAL SNOW for the kids to play in, photos with Santa Claus, a giant jumper and slide, a petting zoo, face painting, hot chocolate, coffee, snacks, and a whole lot more!
Sounds like fun, doesn’t it?
Here’s the idea. We want our Realtor partners to invite their clients and families to something special, hopefully strengthening relationships and bringing in new clients!
And it’s our way of saying THANK YOU!
Now comes the part that might disappoint some people.
Unfortunately, Winter Wonderland will be an invitation-only event.
We cannot accommodate everyone, especially when Realtors bring their clients and families. Between the snow, activities, Santa, parking, and everything else we’re planning, we have to manage attendance carefully.
So we’ll start by extending private invitations to the Realtors who have consistently supported Augusta Financial and our loan officers by trusting us with their clients and referring business over the years.
We’ll send invitations privately, along with all the details and RSVP information.
If we have additional room as the event gets closer, we may be able to extend invitations to more of our Realtor friends.
If you aren’t invited this year, please don’t take it personally. We hope Winter Wonderland becomes an annual Augusta Financial tradition for many years to come, and if we start earlier, we can secure a bigger venue!
If you want to be part of it next year, well, you know where to send your buyers for their financing! LOL!
Seriously, after more than 31 years in business, I know Augusta Financial would not be where it is today without the support of our Realtor partners. This is our opportunity to do something special for the people who have helped us the most along the way.
I’m excited about this one, and I think it’s going to be a BLAST!
Now, Let’s Talk About Interest Rates!

30-Year Fixed? 1/0 Buydown? 2/1 Buydown? Or maybe a 5-Year ARM?
I’ve been spending a lot of time looking at the different mortgage programs available to buyers and trying to figure out which ones make the most sense in today’s market.
And it really comes down to one question.

Where do you think interest rates are going over the next few years?
Some people believe rates will be lower within the next six to twelve months. Others think it could take two years. And some believe we could be waiting three to five years before we see a meaningful decline.
Who is right?
I HAVE NO IDEA!
I’ve been doing this for 36 years, and if there’s one thing I’ve learned, it’s that nobody knows for sure where interest rates are headed!
But that doesn’t mean buyers can’t make some intelligent decisions today.
Let’s assume someone is borrowing $500,000 and has the following mortgage options.

The Traditional 30-Year Fixed Mortgage
At 7.25% with no points, the monthly principal-and-interest payment would be about $3,410.
You know exactly what your payment will be for the next 30 years. No surprises and no future rate adjustments.
But what if you believe interest rates will be lower in a year or two?
That brings us to the temporary buydowns.

The 1/0 Buydown: For Buyers Who Think Rates May Drop Within a Year
This is still a 30-year fixed mortgage at 7.250%, but the buyer gets a temporarily reduced payment during the first year.
Monthly P&I First year (6.25% equivalent) $3,078 / Years 2 - 30 (7.250%) $3,410
That’s about $332 per month in savings during the first year, or $ 3,984 over 12 months.
The cost to fund the Buydown is approximately $3984, which could potentially be negotiated as a seller concession.
If rates decline, the buyer may be able to refinance. If they don’t, the borrower still has the protection of a 30-year fixed mortgage.

The 2/1 Buydown: For Buyers Who Think It May Take Two Years
Now let’s look at the same mortgage with a 2/1 buydown.
Monthly P&I First year (5.25% equivalent) $2,761
Second year (6.25% equivalent) $3,078
Years 3 - 30 (7.25%) $ 3,410.
During the first year, the buyer saves approximately $649 per month.
In the second year, the buyer saves about $332 per month.
That’s approximately $11,772 in total payment reductions over the first two years!
Of course, someone has to fund that amount, and ideally, we negotiate for the seller to pay it through closing costs.
But think about this. If you believe rates could be lower in the next 12 to 24 months, this strategy could give your buyers breathing room while they wait for a refinance opportunity.
And if the buyer refinances early, any unused buydown funds are generally applied toward the mortgage balance, subject to the program rules.

The 5/1 ARM for those who Think Rates Won’t Drop for Three to Five Years?
Let’s assume we can offer a 5/1 ARM at 6.25% for the first five years if the borrower or seller pays two points upfront.
On a $500,000 loan, that’s $10,000 in points. But look at the difference in payments!
30-Year Fixed – 7.25% 0 Points = $3410
5/1ARM 6.25% – 2 Points = $3078
Monthly savings – $332
Savings over 5 years = 19,920
In other words, the buyer spends $10,000 upfront but saves approximately $19,920 in payments over five years.
That’s a net cash-flow benefit of approximately $9920 over the first five years!
And here’s what really gets my attention.

The break-even is approximately 30 months!
If the buyer keeps the mortgage beyond that point, the accumulated payment savings begin exceeding the $10,000 paid in points.
Now, there is a catch!
Unlike the 30-year fixed, the ARM interest rate can adjust after the first five years. If interest rates remain elevated or increase, the payment could rise.
So this isn’t the right loan for everyone. Buyers need to understand how the adjustments work and make sure they can handle a potentially higher payment.
But if someone is comfortable with that risk, it’s certainly an option worth discussing.

So Which One Makes the Most Sense?
Here’s how I look at these choices.
If you think rates will decline within one year, consider a 1/0 buydown.
If you believe rates will decline within one to two years, a 2/1 buydown may make sense.
If you think rates will remain higher for three to five years, consider a 5/1 ARM.
And if you don’t want to think about interest rates again unless you’re refinancing into something better, there’s nothing wrong with the traditional 30-year fixed mortgage!

The point is that buyers have OPTIONS!
As Realtors, you should help your clients understand that buying a home isn’t just about the interest rate. It’s about the price, the payment, the financing strategy, and their long-term financial goals.

Don’t Forget Augusta Financial’s Free Refinance for Life!
One of the biggest advantages we can offer qualifying buyers is Augusta Financial’s Free Lifetime Refinance Guarantee.
If rates improve down the road, qualifying borrowers may be able to refinance without new lender, escrow, or title fees, with eligible appraisal costs reimbursed, subject to our program terms.
That’s a pretty nice benefit when you’re buying in a market where interest rates could eventually decline!
Please let me know if you have any questions.  

Interest Rates
Rates are hanging in there! Yesterday was bad and today is better, but nothing to write home about. 

Loan Programs Snapshot

• Government loans (FHA/VA/USDA): in the high 6’s and low 7’s –
• Conventional (≤ $832,750): in the 7’s
• High-balance: in the 7’s
• Jumbo: In the 7’s
• Bridge Loans: 8.290%

Additional options:

• Bank statement loans (10% down+)
• P&L loans (20% down, no bank statements)
• 0% down options (620+ score)
• DSCR loans (15% down)
• Buydowns Available (3/2/1, 2/1, 1/0)
• Private Money loans – Hard Money  
• Construction Loans
• 203K loans
• Commercial Loans
• Fix and Flip Loans  

Rates subject to change without notice.

Condo Update
Good news:
Nothing!    

Bad news:
Nothing new!    

We love your Non-Warrantable Condo loans!!
Need help checking a condo? Call me, and we can look it up in real time.
Also:
Full California “naughty list” available here:
https://mikemeena.com/non-warrantable-condos/

If you or your clients, friends, or family need guidance, I'm here.

📞 661-291-2222 (Direct)

📞 661-714-6258 (Cell)

📞 661-260-2970 ext. 2222 (Office)

📧 Mike@AugustaFinancial.com

Sincerely,