What is a 2/1 temporary Buydown

As we see mortgage interest rates increase so quickly, the buyer pool in every price range moves down the ladder. Keep in mind that an interest rate increase of 1% reduces the buyer’s buying power by 10%. This means that a borrower that could comfortably afford a $1M property before the increase, can now only qualify for a $900,000 home unless they stretch their ratios.

Some buyers are either financially forced to look at lower priced homes or they just quit looking out of frustration. As a possible solution, sellers can offer a temporary interest rate buydown to the buyer.

A house with a sign that says " sold ".

Buyers Save Thousands in the First 2 Years of the Loan

Contact your lender to get more information.

The mechanics behind the Temporary Buydown are quite simple:

  • Buyer still applies and qualifies for the loan at current interest rate… Example 7%.
  • Because the seller pre-pays a portion of the buyer’s interest for the first two years at closing…
    • The buyer enjoys a 2% rate discount for the first year of the mortgage… Example 5%.
    • The rate discount is 1% for the second year of the mortgage… Example 6%.
    • For the 3rd and remainder of the loan, the interest rate will remain 7%.

Are there any additional restrictions?

  • NO! The buyer must qualify for the purchase loan and the loan must close per the terms of the agreement

How Does a Temporary Buydown a benefit to the buyer?

  • This option allows the buyer to comfortably stretch their income ratios.
  • Buyer can refinance in a two years when rates have gone down.
  • With a full price offer on this property, the buyer can save approximately $20,000.

Contact your lender or my trusted lender to find the actual cost, benefit, availability, and any restrictions.

Kenton Becker – American Pacific Mortgage: 206-423-2552 [email protected]

A picture of an interest rate buydown calculator.
A table with multiple different types of interest rates.

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