Understanding Inflation Buster from Rocket Mortgage

While watching football over the weekend, I saw an advertisement for Rocket Mortgage’s “Inflation Buster”.When I see an advertisement for a mortgage, I am always interested because I get to analyse the product and then share it with my readers.It’s interesting to see how the mortgage industry has adapted to today’s high mortgage rates.The current economic climate is difficult for prospective homebuyers and mortgage lenders. However, this is also the time when creativity flourishes.See what the new program offers to see if it is a good fit for you.

What is Inflation Buster? What is Inflation Buster?

In mid-September, the nation’s top mortgage lender launched “Inflation Buster”, a campaign to combat rising mortgage rates.If you haven’t already heard, for the 30-year fixed rate is now averaging around 7%, up from 3% at the start of the year.It is clear that this has caused havoc for both homebuyers and mortgage lenders. This has caused affordability to be a problem for some and driven down home prices.Rocket Mortgage offers a little relief to customers in the first year of their new loan.The company offers a Buydown Mortgage, which lowers the rate of interest for the first twelve months by 1%.The borrower will make a lower mortgage payment each month for the first year.The company will set up and fund a special Escrow Account, similar to the other mortgage buydowns.A shortfall in funds is automatically covered by the money on that account, ensuring a complete payment.The borrower will save the difference every month for 12 consecutive months, before the mortgage rates and corresponding payments return to the full rate.

Here is an example of inflation buster

The example they give is a borrower who has a loan of $400,000 and qualifies for a rate of 5.75 percent.This would mean a principal and interest monthly payment of $2334.29

Rocket will step in to ease the payment burden by providing a buydown which lowers the rate of interest to 4.75% during the first year.The principal and interest payments would be reduced to $2,086.59 during the first 12 months of the loan.Rocket Mortgage has “fully funded” the loan. This is a total monthly of $247.70 or $2,972.40.It is a way to reduce the monthly payments while the borrower becomes accustomed to home ownership.Rocket says that the lower payment is automatically offered to clients who are applying for conventional, FHA or VA loan.Rocket Pro TPO, the wholesale arm of the company, also extends this offer to Mortgage Broker customers. The funding is provided by the home seller or real estate agent in these cases.

Inflation buster is a good deal?

When I see these offers, I try to decide if they are a great deal or a marketing trick.The conclusion often depends on the total cost of the transaction, which includes all costs incurred beyond the promotional campaign.Why not choose Rocket Mortgage, for example, if they offer a solid price and a reduction in the first year’s payment via their InflationBuster buydown?If another lender offers a better deal without a buydown of the rate, it’s probably a better choice.Consider alternative loan products such as adjustable rate mortgages, such as the 5/1 ARM and the 7/1 ARM.You should consider all the costs and the overall package of the offers you are considering.Compare offers and compare the payment reductions for 12 months.Real studies have shown that buyers who compare mortgage rates and shop around can save money.You could lose money by only obtaining one mortgage quote. So, put in some time, however unpleasant it may be.Other lenders, such as United Wholesale Mortgage (UWM), and CrossCountry Mortgage, have also launched similar buydown programmes.Ask if these incentives are available, no matter who you talk to.