A 2/1 buydown lowers your interest rate by 2% in year one and 1% in year two. From year three on, you pay your full note rate. The difference is usually paid up front by the seller or builder.
Move the sliders to see how the monthly principal and interest payment steps up on a 30-year fixed loan, and how much the buydown costs whoever funds it.
Illustration only. Shows principal and interest on a 30-year fixed loan and does not include taxes, insurance, mortgage insurance or HOA dues. This is not a rate quote, a loan estimate or a commitment to lend. Your rate, APR and terms depend on your credit, property and loan program.
Most often the seller or builder covers the cost as a concession negotiated in your offer. Your real estate agent and I work out the amount together.
That money is set aside when you close. Each month for two years, it makes up the difference between your reduced payment and the full payment.
It rises once after month 12 and again after month 24. After that it stays at your fixed note rate for the rest of the loan. No surprises.
Usually the seller or builder, as part of the purchase negotiation. In some cases a lender credit can be used. I will tell you what your loan program allows.
Unused buydown funds are typically credited toward your loan payoff rather than lost. The exact handling depends on your loan program, so we will confirm it before you close.
No. Your loan is a fixed-rate mortgage. The payment schedule for all three stages is set at closing and does not move with the market.
Points lower your rate permanently by a smaller amount. A 2/1 buydown gives a larger reduction that lasts two years. Which one wins depends on how long you plan to keep the loan.
Send me the price range you are shopping in and I will put real numbers next to a price reduction and a permanent buydown, so you can pick what fits.