Buyer AdviceTrending News December 21, 2023

Mortgage Savings? Look to Your Seller!

Steep mortgage payments dampening your dreams of homeownership? A 2-1 buydown, plus a willing seller, could be your answer.

What’s a 2-1 buydown?

It’s a mortgage strategy that temporarily trims your interest rate during the early years of your loan, offering more manageable payments. It’s ideal for first-time homebuyers or those eyeing an income surge soon.

Here’s how it works:

• Year 1: Interest is slashed by 2 percentage points below the lender’s rate. So, if a lender offers 7%, you’re only on the hook for 5%.

• Year 2: Interest nudges up but still remains 1 percentage point below the lender’s rate. With a 7% lender rate, you’d owe 6%.

• After Year 2: Interest resets with the lender’s standard rate for the remaining term. In this scenario, that’d be 7%.

The seller’s role:

Sellers can sweeten the deal by shouldering the buydown cost, which makes this a compelling negotiation chip during price talks.

While enticing, remember the 2-1 buydown is short-term relief. Payments will jump after two years, so it’s important for buyers to plan ahead for the increase.

Intrigued by a 2-1 buydown? Let’s chat about how this mortgage solution fits into your home-buying plans in 2024. connect with me here