The Landscape of Interest Rates
Over the past year, interest rates have been on the rise. For investors, this translates to a more challenging landscape. Currently, a best-case scenario for a 20% down payment hovers around 8%. However, it's essential to recognize that low rates come at the cost of points, especially for properties at a $150,000 price point. As property prices increase, the variability in interest rates becomes even more pronounced.
The Forward Commitment
Spartan Invest has introduced a forward commitment option that revolutionizes the way investors secure financing a 30-year fixed interest rate. Historically, these offers have only been made available on new construction deals when home builders have a wide selection of inventory. Lumping all properties together on a rate lock ourselves allows us to commit a lower, locked interest rate on our properties for investors until the rate lock expires.
How it Works
- Agreement: The buyer and the lender agree on the terms of the forward commitment, including the interest rate, the loan amount, and the duration of the commitment. This agreement is made before the investor actually purchases the property.
- Rate Lock: Once the terms are agreed upon, the lender "locks in" the interest rate for the buyer. This means that the buyer is guaranteed to receive a loan at that specific interest rate, regardless of any future interest rate fluctuations.
- Timing: Forward commitments often have a predetermined time frame during which the buyer must secure the loan and close the real estate transaction. This could be 30, 60, or 90 days, depending on the agreement.
- Property Purchase: After the forward commitment is in place, the buyer proceeds with finding and purchasing the property. When they are ready to close the deal, they can secure the financing at the agreed-upon interest rate.
Forward commitments are especially valuable when interest rates are expected to rise in the future. By locking in a lower interest rate in advance, buyers can secure more favorable financing terms and potentially save money over the life of the loan. It's worth noting that forward commitments are not available in all real estate markets or from all lenders.
The Benefits of the Forward Commitment
- Lower Upfront Costs: One of the most significant advantages is the reduction in upfront costs. With the forward commitment, points become a thing of the past. Instead, the cost of buying down the interest rate is rolled into the property price, increasing it by a set amount (e.g., $7,000).
- Stable, Low Interest Rate: The forward commitment offers investors the opportunity to lock in a low interest rate. Our last interest rate was locked in at 5.375%. What sets this apart is that it's not a temporary promotion or an adjustable rate; it's a 30-year fixed rate.
- No Need for Refinancing: Traditional loans often require refinancing to secure a lower rate. With the forward commitment, investors can sidestep the hassle of refinancing, saving both time and money.
Why the Hesitation?
There's essentially very little risk to investors taking advantage of the Forward Commitment. Spartan Invest, however, employs a meticulous, data-driven approach to minimize risks for investors. By purchasing the low rate upfront for multiple properties in our inventory, we absorb the risk for investors.
Given the uncertainty surrounding future interest rates and the uniqueness of the forward commitment, the time to act is now. Waiting on the sidelines, hoping for rates to drop back to historic lows, might not be the wisest strategy. The current offer provides stability, predictability, and potential cost savings for investors—benefits that shouldn't be overlooked.
By taking advantage of the forward commitment, you're not only locking in a favorable interest rate but also securing your financial future in real estate with a 30-year fixed rate. This means you won't have to worry about refinancing or interest rate fluctuations for decades to come.
In conclusion, Spartan Invest's forward commitment is a game-changer for real estate investors. It offers stability, lower upfront costs, and the coveted 30-year fixed interest rate. If you've been on the sidelines, waiting for an opportunity to enter the real estate market, now is the time to consider the forward commitment. It's a pathway to financial security and a successful real estate investment journey.
To take advantage of the forward commitment, investors can start by getting pre-approved through Aaron Chapman of Security National. All properties listed on Spartan Invest's website are eligible for this special interest rate.