Buyers in today’s market should take advantage of Home Sellers’ willingness to apply concessions towards closing costs. One great opportunity in today’s market? The 2-1 buydown mortgage. This tool creates an opportunity for an owner to have a lower payment the first couple of years in their new home. Let’s take a look.
How A Two-One Buydown Works
Generally the home seller agrees to a concession at closing. This concession is then used to modify the home mortgage payment during the first two years of the loan.
Year One Boulder home owners save 2 percent on their interest rate. Year two Boulder home owners save one percent – thus the 2-1 buydown language.
Point/s Paid At Closing Fuels This Mortgage Trick
It doesn’t have to be a buyer cost. You’ve probably heard how the market has slowed down with increasing home mortgage interest rates. Well, sellers are suddenly willing to negotiate to get their homes sold. And one such way is by agreeing to pay the point or points required to finance a 2-1 mortgage buydown.
Here’s a bonus to that system. Let’s say the Seller agrees to pay the point so you can have a 2-1 buydown mortgage. Year one, you are enjoying your lower payment and then, guess what? The mortgage rates fall. It is prime time for a refinance. You can take advantage of whatever amount of the original point has been utilized thus far. And use that to refinance your home into an all around better home mortgage rate.
Pretty neat, right!?
Year One Savings
Year one the payment savings is tremendous. This savings to the home buyer can take away some of the sting of today’s home mortgage interest rates. Let’s face it, rates are significantly higher than just two or three years ago.
In the second year, buyers still save versus their usual payment. But the savings is not as great as in year one.
Lower Home Payment Tool
A common refrain I hear lenders bantering about these days is, “you are buying your dream home, but you are not locked into this mortgage rate forever.” This is really true. Just in the past six months, home mortgage rates have come down. Down, not up. Using a 2-1 buydown might help you ease into your dream home.
Who knows, you could be refinancing to a lower interest rate and smaller payment in just a few years’ time.
But regardless of where home mortgage rates wind up, the 2-1 buydown allows savvy home buyers to ease into a home.
This Is A Great Time To Buy Your Home
Make no mistake, this is an excellent time to buy a home. Why?
First, higher home mortgage rates have scared off a lot of the competition. Two years ago you might have bid $100,000 over list price to win a bidding war on an entry level house. Today, that competition is evaporated.
Second, buying with some fear in the market creates an opportunity. Opportunities can lead to positive outcomes. There is no way for me to know where the market will be tomorrow. But relative to yesterday, the competition is gone. That’s got to be worth something.
First Time Home Buyer Tip
Just a great tool to consider when it comes time to own your first home! Something like this is a great way to get your dream forever home but keep the payment cheaper in years one and two.