Combat High Interest Rates With a 2-1 Buydown

Are you interested in paying a lower-than-market interest rate? Here’s how.

Today we’re talking about an interesting loan technique that several of our clients are starting to use, and it's called the 2-1 buydown. Essentially, it allows a borrower to buy down the interest rate of their mortgage by two percentage points for the first year of that loan and one percentage point for the second year. 

To make this happen, we negotiate with the seller to set up an impound account, then find out from the mortgage broker how much it would cost to buy down the interest rate for those two years. 

For example, if you want to buy a house with a 5% interest rate mortgage, we would negotiate to get it down to 3% the first year and 4% the second year. Then you can refinance if rates drop—in the last four recessions, mortgage rates have dropped between 1% and 2% to get out of that valley, so it could happen again. 

If you have any questions about this 2-1 buydown, please call anytime. We would be delighted to help you with any of your real estate needs!