A 2-1 Buy Down is a loan feature that allows the Seller to buy down the Buyer’s rate temporarily, thus, allowing the Buyer to have a lower payment for the first two years of the loan. This is a valuable feature as markets shift to a higher rate environment as it allows Sellers to position their home more favorably and helps Buyers by affording them a significantly lower payment for the first two years of their mortgage. This temporary buy down differs from points used to lower a mortgage rate in that the effective rate is lowered by 2 % in the first year and 1 % the second year, before reverting to the fixed note rate.

Quick facts

• Temporary buy-down where the first two years of the loan are at a lower interest rate
• Normal rate takes effect in the third year
• Seller will contribute a one-time fee at closing that is deposited in an escrow account

How does a 2-1 buy-down work?

2-1 Buydown
Year 1 – 2% lower than the note rate
Year 2 – 1% lower than the note rate
Year 3 – Full note rate

Scenario

Purchase Price is $300,000 with 5% down or $15,000

Your approved loan amount is $285,0000 over 30 years

Year 1 you will have monthly payment of $1529

Year 2 you will have monthly payment $1708

Year 3 you rate will adjust back to the original rate with monthly payment of $1898

 

First two years offer savings of $6642 for the buyer .

*Example is for illustrative purposes only and may not be accurate. This is not a commitment to lend nor a preapproval. Consult a mortgage Loan officer for fill details.

The lower month payments for the first two years of home ownership and the extra time to budge for the payments is one of benefits of the 2/1 buydown.

If you have any questions call 561-641-4663

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