Unlock Serious Savings with a 2-1 Mortgage Rate Buydown

Are you tired of feeling like your mortgage payment is eating up all of your hard-earned money each month? Fear not, homeowners! There’s a little-known secret that could help slash your monthly payment and put more cash back in your pocket. It’s called a 2-1 buydown, (or a 3-2-1, 1-1, 1-0, etc.) and it’s a game-changer for anyone looking to save big on their home loan. Keep reading to find out how you can unlock serious savings and make your wallet happy today!

Reduce Your Mortgage Rate and Payments Temporarily

Are you ready to kiss those sky-high mortgage payments goodbye for a year or three until rates settle back down? A rate buy down could be your ticket to home affordability until mortgage rates come back down. Using the 2-1 buydown as an example, this clever financing strategy allows you to temporarily lower your interest rate for the first two years of your loan, resulting in a significantly reduced monthly payment.

But how does it work? It’s simpler than it sounds. You pay an upfront fee to “buy down” your interest rate for the first two years of your mortgage. In the first year, your rate is reduced by 2%, and in the second year, it drops by 1%. After that, your rate goes back to the original terms of your loan. But don’t worry – those two years of savings can make a huge difference in your overall financial picture. The same concept applies for all version be it 3-2-1, or a 1-1, or a 1-0.

For Example, you work with your Realtor to negotiate Seller Concessions or Seller Credits on the purchase of the home to cover the cost of the buydown at closing by taking some of their proceeds to pay the lump sum upfront, which is used to reduce the interest rate on your loan for the first two years. This results in lower monthly mortgage payments and significant savings over time. It’s a smart financial move that can have a big impact on your bottom line. If the value of the home will support it, you could offer list price or over asking list price, and then ask the seller for a credit to cover the cost of the buydown at closing.

With so many different versions of temporary buydown options, one is likely to fit almost any seller concession scenario. They work the same except the number of years and how much the rate changes in a given year adjusts accordingly to the option chosen. At Cederholm Mortgage Advisors we have products with over 150 mortgage lenders and options to do a temporary buydown such as this even without needing any seller concessions accepted in your real estate purchase agreement. 

For Example, the first number is how much lower your rate will be represented in 1% increments, so a 3-2-1, if the going PAR (not cost) Mortgage Rate is say 7%, then the first year your mortgage payment will be based on a rate 3% lower or 4%, second year it will be 5%, third year it will be 6% and the fourth to 30th year your rate would be the PAR 7% rate (assuming you still have the same mortgage and have not refinanced by now, which is the point and beauty of this add-on to your mortgage, to bridge the gap).

Ready to unlock some serious savings on your mortgage with a solution like this? This innovative financing option allows you to enjoy a lower interest rate temporarily for the first two years of your loan, which means more savings and money in your pocket each month until rates come back down without having to wait to buy a house. And who doesn’t love the sound of that?

To help you understand the concept a little further, 1-1 for example means that the rate is 1% lower than the interest rate you locked in at for year one and year two, returning to the standard locked rate in years 2-30 on a 30 year fixed mortgage.

Mortgage lenders like United Wholesale Mortgage (UWM), the #1 mortgage lender in the country and one of our wholesale mortgage lender partners, often have special promotions to help homebuyers achieve homeownership easier and with incentives for all types of home loans, Conventional Loans or government backed mortgage loans such as a VA Loan or FHA Loan and homebuyers, whether a first time home buyer or a current homeowner.

Unlock Savings with a 2-1 Mortgage Rate Buydown!

A mortgage rate buydown can make affording a mortgage easier on your budget goals. With a lower monthly payment, you may be able to afford a larger loan amount or qualify for a better interest rate. This can be especially helpful for first-time homebuyers or those with less-than-perfect credit. It is important to note that a temporary rate buy down does not help with qualifying for a mortgage. In that case, a permanent interest rate buydown, usually referred to as discount points is the path to pursue and you can use seller concession or credits for those as well.

A permanent, or discount rate reduction can help when affordability or qualification due to debt-to-income (DTI) ratios are exceeding the lender or loan program guidelines to qualify for the mortgage you are trying to obtain.

Whatever your situation, don’t let misleading news media commentary on rates scare you out of seeking a mortgage professional to structure a finance strategy for you to be able to qualify and afford buying a house so you can take advantage of building equity and tax reduction benefits. The only mortgage interest rate that actually matters is the rate you secure and lock in, not what is advertised or shared in news media sound bites. So why not explore this option and see how much you could save?

The Cost of Waiting to Buy A House

The cost of waiting is a real in real estate. For example, if the average expected appreciation in housing for Denver, Colorado were 5% then 12 months from now, a $500,000 home will be $25,000 more expensive to buy. According to Redfin, the current Colorado Median Home Sale Price change year-over-year is currently 7.4% growth, as of this writing. However, using only 5% growth year-over-year in this example, waiting for rates to drop a year from today could cost you $25,000 more in purchase price.

Comparatively, a rate that is 1% higher for 12 months (assuming you do not take advantage of a temporary rate buydown options, which would make the rate temporarily the same interest rate for 12 months) would cost you $312.30 a month, or $3,747.60 a year. This is a net savings of $21,252.40 over 12 months by not waiting one year to buy a house, even without using a buydown option.

In March 2024, home prices in Colorado were up 7.4% compared to last year, selling for a median price of $601,800. On average, the number of homes sold was down 9.21% year over year and there were 6,163 homes sold in March this year, down 6,760 homes sold in March last year. The median days on the market was 33 days.
Source: Redfin

Schedule a strategy call to discuss the best options for you to make smart financial moves to achieve happy homeownership using a buydown option to start building equity, save on mortgage payments, and secure a home at a lower price point today.

Make Your Budget Happy Today!

It’s time to make your wallet happy and take control of your mortgage payments. With a buy down, you can enjoy lower monthly payments for the first two years of your loan and put more money back in your pocket. And who doesn’t love the sound of extra cash each month?

In conclusion, a buy down is a fantastic option for anyone looking to save money on their mortgage payments. Check out our free mortgage calculators to calculate what your payments would be if they were 1%, 2%, or 3% lower today and get the home. With lower monthly payments for the first two years, this financial strategy is a no-brainer.

So say goodbye to higher mortgage payments and hello to savings. It’s a smart financial move that can help you achieve your financial goals and enjoy a little more financial peace of mind. Make your wallet happy today and slash your mortgage payment cost with solutions like this to help you win! Your wallet will thank you!