A 2-1 buydown is a mortgage financing strategy where the interest rate is temporarily reduced for the first two years of the loan, then returns to the full rate for the remainder of the term. Here’s how it typically works:

  • Year 1: Interest rate is reduced by 2%

  • Year 2: Interest rate is reduced by 1%

  • Year 3 and beyond: Full interest rate applies

🏠 Benefits for Home Buyers:

  1. Lower Initial Monthly Payments

    • Payments are significantly lower in the first two years, helping buyers ease into their mortgage financially.

  2. Improved Cash Flow Early On

    • Buyers can use the money saved on payments for:

      • Moving expenses

      • Renovations or home furnishings

      • Building an emergency fund

  3. Great for Rising Income

    • Ideal for buyers expecting income growth—like recent grads, new professionals, or business owners scaling up.

  4. Seller or Builder Incentives

    • Often used as a seller concession in a buyer’s market, where the seller pays the cost of the buydown instead of lowering the sale price.

  5. Potential Refinance Opportunity

    • If interest rates drop within the first few years, buyers might refinance before the full rate kicks in.

  6.  The seller can pay for this as part of closing costs concessions OR the buyer can pay for this within the rate, so either way, there is no out of pocket or up front costs.

 

For more information, please reach out to Mac Church with Atlantic Coast Mortgage.

mchurch@acmllc.com

NMLS#659377