2/1 Buydown
How a 2/1 buydown may be able to lower your monthly housing payment
When interest rates were at historic lows, a typical fixed rate mortgage loan was all most people needed. Now, rates have risen and borrowers may be looking for options to lower their monthly payment. Rates are still below long-term averages, yet appreciably higher than before. And of course, higher interest rates lead to higher monthly payments.
GMFS offers a loan program that can help ease the burden of a higher monthly payment, with help from your builder or independent seller. With a 2/1 Buydown, you’ll get a 30-year fixed rate loan with a reduced payment for the first 2 years. The 2/1 Buydown effective reduces the interest rate on the loan by 2% during the first year and 1% the second year.
This is also referred to as a Seller Paid Buydown. The Seller may attract buyers to their home by offering a seller paid buydown subsidy. Offering a seller paid buydown, the seller is offering an attractive incentive that will set them apart from other sellers in the marketplace. By funding a seller paid buydown subsidy, the seller provides a valuable benefit to the borrower by reducing the monthly payment the buyer will pay for the first 2 years of the loan.
You can ease your way into a home with lower payments that simply step up at the end of the first and second year then remain fixed for the remainder of the loan.
A 2/1 Buydown comes with extra upfront costs that are paid by the seller or builder, with their agreement to do so. There are additional details that vary according to each borrower’s unique situation.
What is a 3/2/1 Buydown?
A 3/2/1 Buydown is where a Seller pays a fee, effectively prepaying a portion of the borrower’s P&I payments for the first 3 years of the mortgage. As a result, the payment to the borrower is 3% less than the note rate for the 1st year, increases to 2% less than the note rate for the 2nd year and increases to 1% less than the note rate for the 3rd year and from there increases to the note rate for years 4 and beyond. *Borrower must qualify at the full note rate.
What is a 1/1 Buydown?
A 1/1 Buydown is a program that has the Seller pay a fee, effectively prepaying a portion of the borrower’s P&I payments for the 1st year of the mortgage. As a result, the payment to the borrower is 1% less than the note rate for the first 2 years and increases to the note rate for years 3 and beyond. *Borrower must qualify at the full note rate.
What is a 1/0 Buydown?
With a 1/0 Buydown, the Seller pays a fee, effectively prepaying a portion of the borrower’s P&I payments for the 1st year of the mortgage. As a result, the payment to the borrower is 1% less than the note rate for the 1st year and increases to the note rate for years 2 and beyond. *Borrower must qualify at the full note rate.
Talk with our team today about what a buydown could do for you!
