2-1 Buydown - How does that help you?
About this video
In this episode, we discuss what a 2-1 Buydown is and how this can help you as a buyer or a seller in this market!
Key takeaways
- A 2-1 buydown lowers your mortgage rate by 2 points in year one and 1 point in year two. With a 7% note rate, you'd pay about 5% the first year, 6% the second and 7% for the rest of the loan.
- The cost of the buydown is paid up front, by the buyer, the seller or both, and is often negotiated as a seller concession.
- It is not an adjustable-rate mortgage: the rate steps are set at closing, and after year two the rate stays at the note rate for the rest of the loan.
- Talk to a loan officer about whether a buydown fits your budget.
Questions this video answers
What is a 2-1 buydown?
A temporary rate reduction: 2 points lower in the first year and 1 point lower in the second, then the full note rate for the rest of the loan. The cost is paid up front.
Who pays for a 2-1 buydown?
The buyer, the seller or both. In a slower market, buyers often negotiate for the seller to pay for it.
Is a 2-1 buydown an adjustable-rate mortgage?
No. The payment schedule is set at closing, and after year two the rate stays fixed at the note rate.
Read more: Buy a home
Notes written by Huerkamp Home Group from this video. Figures are as stated in the video on November 11, 2022; check the current numbers in our market reports.
