What is a Temporary Buydown?
There is more than one way to get a lower interest rate. One option that some borrowers use is getting a temporary buydown. A temporary buydown allows for up-front funds to be put into an escrow account to reduce the effective interest rate for one, two, or three years at the start of the mortgage. In turn, this could reduce the borrower's monthly mortgage payment temporarily.
TYPES OF TEMPORARY BUYDOWNS
The type of temporary buydown you seek will depend on your individual needs. A borrower could reduce their effective rate for one year or up to three years if the seller is willing to pay for it. The rate returns to the original fixed rate after the buy down period.
A 3-2-1 temporary buydown can reduce a homebuyer's interest rate for three years and will lower the rate by 3% the first year, 2% the second year, and 1% the third year. After the third year, the rate will return to the original rate for the loan term.
The 2-1 temporary buydown reduces the borrower's interest rate for two years, reducing the rate by 2% the first year and 1% the second year.
Finally, the 1-0 temporary buydown allows the borrower to reduce their interest rate by 1% for the first year of their loan.
Want to learn more? Contact me today!
Casey Bowman
NMLS#: 516678 |
1201 Wakarusa Drive, Building C, Suite 1B |
PrimeLending, A PlainsCapital Company NMLS#: 13649. Equal Housing Lender.
