2-1 Buydown Right for you?

Are you in the market for a new home but struggling to afford the rising interest rates? Have you considered a 2/1 mortgage buy down loan?

A 2/1 buydown allows borrowers to pay more upfront in exchange for reduced interest rates for the first two years of their mortgage. This means that in the first year, your interest rate will drop by 2%, in the second year it will drop by 1%, and then return to the full interest rate by the third year.

While this can be a great deal, it's important to remember that borrowers must be able to afford the monthly mortgage payments after the interest rate returns to its original rate.
But how exactly does a 2/1 buydown work? It's an arrangement that allows borrowers to more easily qualify for mortgages with a lower interest rate. Some loans allow buyers to permanently lower their interest rates by paying for points from the lender. A 2/1 buydown is a temporary decrease that lasts for two years, giving buyers time to save money.

For example, if you qualify for a 30-year mortgage at 5% and the seller is proposing a 2/1 buydown, your interest rate would be 3% for the first year and 4% for the second. At the start of the third year, the interest rate on the loan would return to the original 5%.
The cost of a 2/1 buydown varies depending on the loan amount and the lender, but it can save you thousands of dollars on your monthly payments during the first two years of your mortgage.

While the major advantage of a 2/1 buydown is saving on monthly payments, there are other advantages and disadvantages to consider. Some advantages include the ability to ease into homeownership with smaller monthly payments, having more disposable income each month, and the ability to afford a larger mortgage. However, there are also disadvantages such as higher upfront costs, potential problems with escrow, and increased payments in the long run.

If you're interested in learning more about a 2/1 buydown and whether it's the right choice for you, contact Isaiah Slutter with Edwards Financial Services at 480-320-3591 or you can email him, Isaiah@EdwardsFinancial.biz . He can help you navigate the process and determine if a 2/1 buydown is the best option for you. Don't let rising interest rates keep you from achieving your dream of homeownership – call Isaiah today.