What is a 2-1 Buydown?
A 2-1 buydown is a temporary mortgage financing option that allows borrowers to lower their interest rate for the first two years of their loan. In year one, your rate is reduced by 2%, and in year two, it’s reduced by 1%, before returning to the original fixed rate in year three and beyond.
For example, if your permanent rate is 6.5%, a 2-1 buydown would make your rate 4.5% in the first year, 5.5% in the second, and 6.5% afterward.
How Does It Work?
The difference in interest is covered upfront—typically paid by the seller, builder, or sometimes the lender—as part of the closing costs. This can make the home more affordable in the short term while you adjust to homeownership expenses or anticipate higher income down the line.
Who Should Consider a 2-1 Buydown?
A 2-1 buydown can be a smart strategy if:
Pros and Cons
Pros:
Cons:
Is It Right for You?
The 2-1 buydown can be a valuable tool for certain buyers, but it’s not one-size-fits-all. Speaking with a trusted mortgage expert is key to determining whether this option aligns with your long-term financial goals.
Contact A and N Mortgage today to explore whether a 2-1 buydown could make your path to homeownership more affordable. Our loan experts will walk you through every detail and help you find the best fit for your needs.
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