"A 2-1 buydown can be a useful option for buyers who want lower mortgage payments in the first years of homeownership-especially in today's higher-rate market. Whether you're buying a house in Austin, TX or searching for a home in Denver, CO , this temporary rate-reduction option can make the early years of a mortgage more affordable."
"A 2-1 buydown is a temporary mortgage arrangement where your interest rate is reduced for the first two years of your loan: The seller, builder, lender, or buyer pays an upfront fee to "buy down" the interest rate for those first two years, creating lower monthly mortgage payments at the beginning of the loan."
"Usually one of the following: Seller: Common in buyer's markets or new construction incentives Builder: Often used to attract buyers in new developments Lender: Sometimes offered as a promotional incentive Buyer: You can pay the cost yourself, but this is less common"
A 2-1 buydown reduces the mortgage interest rate in the first two years, typically by two percentage points in year one and one point in year two, before returning to the note rate. An upfront fee paid by the seller, builder, lender, or buyer funds the buydown and is deposited into an escrow account to supplement monthly payments during the reduced-rate period. Buyers commonly use it to lower early mortgage payments, bridge to refinancing, or make payments more affordable in higher-rate markets. Costs equal the payment difference for the reduced-rate years, and alternatives include permanent buydowns, ARMs, and seller concessions.
Read at Redfin | Real Estate Tips for Home Buying, Selling & More
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