2/1 Buydowns Offer Relief from Rising Rates

Your daily news broadcast sounds discouraging, but the news doesn’t show you ways around today’s high rates and price increases. With a little creativity, your dream home is still within reach.

Here’s how a 2/1 Buydown offers you creative relief from today’s economic environment.

What Does a 2/1 Buydown Do?

With a 2/1 Buydown, you get lower rates for the first two years of your mortgage. Each year, the rates slowly rise. Then, your third-year mortgage returns to the permanent rate.

For example, the current mortgage rate is around 7%. If you have a 2/1 Buydown, you only pay a 5% interest rate the first year and a 6% rate the second year. The third year’s payments will be back at 7%.

How Does a 2/1 Buydown Work?

The first two years of interest are lower because either a seller, home builder, or buyer pays the lender upfront fees to support the lower payments. As a buyer, you would likely pay if you received gift funds from someone else to cover the buydown’s cost.

More often than not, you’ll want to look for sellers or builders offering a 2/1 Buydown as an extra incentive to buy the home. This means they pay the buydown cost, and you get lower payments the first two years after purchasing the home.

Is a 2/1 Buydown Right for You?

Like other mortgage products and incentives, a 2/1 Buydown should fit your desired lifestyle. It may be right for you if:

• Homeowners investing in a short-term home
• Homeowners expecting personal debt to decrease three years from now
• Homebuyers who would like a lower payment for the first two years of the loan
• Sellers who want to give incentives to prospective buyers

Have you found a home offering a 2/1 Buydown? Get pre-approved with First Bank today and take advantage of this opportunity to lower your rates.