Owner / Sr Loan Officer | NMLS: 93076
| What is a 2-1 buydown? It is a financing tool where your interest rate is reduced by 2 percent in year one and 1 percent in year two, before settling at the full note rate in year three. The seller or builder usually pays for it. On a typical Cleveland County home, that can mean a few hundred dollars a month back in your pocket while you settle in. Here is a plain example. Say your rate is 7 percent on a $250,000 loan. With a 2-1 buydown you pay at 5 percent the first year and 6 percent the second year. Your first-year payment drops by roughly $300 a month. That is real grocery money for a family getting used to a new house payment. Who pays for it? Almost always the seller or the builder, as a concession negotiated into your offer. The cost gets set aside in an escrow account and covers the difference each month. You are not borrowing it and it does not get tacked onto your loan. Now the honest part, because you will always get that from me. A buydown is temporary. In year three you pay the full rate, so you must qualify at the full rate and budget for it. If the only way the house works is the year-one payment, that is not a buydown problem, that is a budget problem, and I will tell you so. When does it shine? When sellers are negotiating, when you expect your income to rise, or when you plan to refinance if rates come down. We run a side-by-side for every client comparing a buydown against a price reduction against permanent points, because the right answer is different for every family. Thinking about making an offer and wondering what to ask for? Call Mathewson Mortgage Capital. Ten minutes on the phone and you will know exactly which lever to pull. |
Owner / Sr Loan Officer
Mathewson Mortgage Capital | NMLS: 93076
