Seller-Paid 2-1 Buydowns are the newest darlings to hit the housing industry in a while.

So, what is a 2-1 buydown exactly and how does it benefit you? The first and most important thing about the product is that it MUST be paid by the seller. There is no cost to the buyer and its purpose is to make the home you are purchasing more affordable for the first two years.

How it works:                                                                                                                                        Your lender will lock your interest rate in at the current market rate. The first year of the mortgage, your rate will be reduced by two whole percentage points. For example, if you locked your rate in at 7.5%, your first year rate would be 5.5%. This would be a huge savings on the monthly payment. The second year, the rate would be 1% lower than the locked in mortgage rate, or in this scenario,  6.5% and even though the payment would go up, the thought process is that, you should be making a higher income after a year, so the increased payment should not affect your disposable income. Year 3, the rate adjusts to the locked in rate, and at this time, you will have the opportunity to refinance to the current market rate, which should be at least 1.5-2% lower by end of 2025. You will then be able to lock in at a lower rate and most likely be around where you were at that first year. in the buydown. Meanwhile, you will have gained equity during this time and should be able to roll your closing costs into your loan, so there will be no out of pocket expense. The 2-1 buydown is not available to all products, however, so you will want to check with your lender for guidelines surrounding it.

If you are currently searching for a home, ask your lender about the 2-1 buydown and if you are selling a property, this may be a huge advantage in helping you sell your home.

For more information about this program, please reach out to Mac Church with Atlantic Coast Mortgage at mchurch@acmllc.com.