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Bringing Household’s Monthly Costs Down to an Affordable Level
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Bringing Household’s Monthly Costs Down to an Affordable Level

A 0.5 percent reduction in the rate on a $100,000 mortgage saves the borrower $35 a month, or alternatively allows a borrower who could afford the higher rate to increase the loan by only roughly $6,000.

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Mortgage revenue bonds and other interest rate subsidy programs can bring a household’s monthly costs down to an affordable level. But, by themselves, these programs don’t overcome the more significant wealth barriers. For instance, a 0.5 percent reduction in the rate on a $100,000 mortgage saves the borrower $35 a month—or alternatively allows a borrower who could afford the higher rate to increase the loan by only roughly $6,000. For this reason, these programs are increasingly paired with down payment assistance programs.

This lowers the buyer’s payments by reducing the amount of their mortgage instead of the interest rate, while addressing wealth barriers at the same time if some of the public equity is shared with the buyer.

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