Buyer Incentives: What Is a 2-1 Buydown?
As the market continues to cool, buyers are seeing more sellers offer incentives to buyers, one being 2-1 buydowns.
What is a 2-1 buydown?
A 2-1 buydown is a mortgage agreement that provides for a low interest rate for the first year of the loan, a somewhat higher rate for the second year, and then the full rate for the third and later years.
🏡 A 2-1 buydown is a type of financing that lowers the interest rate on a mortgage for the first two years before it rises to the regular, permanent rate.
🏡 The rate is typically two percentage points lower during the first year and one percentage point lower in the second year.
🏡 Sellers, including home builders, may offer a 2-1 buydown to make a property more attractive to buyers.
Is a 2-1 buydown smart for you as a homebuyer?
Usually, yes. This incentive can help you during the initial period of getting into your home, when expenses tend to be higher overall. 2-1 buydowns can be a good deal for most homebuyers, provided that they will be able to afford the higher monthly payments once those begin. Talk to your Realtor and lender to see what the numbers will look like throughout your mortgage with this special incentive and if this works for you!
