2 1 Buy Downs In Ohio

Rodney Reynolds discussing 2 1 Buydowns in Ohio

Hello, this is Rodney Reynolds, your mortgage guy coming at you today with a topic that we’ve seen more and more recently.

That is a two-one buy down.

What is a 2 1 Buy Down?

Well, years ago, when mortgage rates were high, this was a very common loan that was used to purchase a home.

The whole intent and purpose of it is to gradually help an individual grow into their mortgage. We know what happens, you buy a new home, and then you make purchases like furniture and other things. You have to gradually grow into your payment. A 2 1 buy down is a tool that allows you to grow into your payment.

Here’s How 2 1 Buy Down Works

Say your interest rate is 6.25%. That’s the going rate for today. We’re gonna buy your rate down to 4.25%. And so what happens is, on the initial inception of the loan for the first 12 months, your mortgage interest rate would be 4.25%.

The second 12 months of the loan, the second year, your interest rate goes to 5.25%, and from years three through 30, it’s fixed at 6.25%.

What does 4.25% to 5.25% to 6.25% do for you?

Well, for example, if you’re buying a home for $400,000, you’re putting down 10%. You’re borrowing $360,000. Your savings for the first year to your principal interest would be $450. In the second year, your savings would decrease to $230, and then your payment settles in from years three through 30. That’s over $8,000 in savings for the first two years.

The interest savings could have a tremendous impact on the borrower.

Who Pays For a 2 1 Buy Down

Now, who pays for this 2 1 buy down? Well, what we normally do is in writing your contract, the agent would ask for seller concessions, and in this case, on $400,000, a 2% seller concession will cover the entire cost of the buy down. So there are no monies out of your pocket as a home buyer in the situation.

The seller is padded through the negotiated sales price of the home. And now you can grow into your payment. You can make a couple of purchases that you want to make, or you know you have a raise coming in a year that will help offset the cost of that payment for you.

A Buydown Is Not For Everyone

Let’s be crystal clear about that. If you know you’re moving in a couple of years, then you probably don’t want to do a buydown. and so, what’s the best thing to do? Talk to your lender and let your lender know your specific goals and plans so that he or she can advise you on whether a buy-down is right for your particular situation.

So that’s just a few thoughts on a buydown. You’ll see buy-downs become more and more prevalent as the rates continue to increase. And so now you have a brief explanation as to how a 2 1 buy down works, who pays for them, and some of the advantages.

This is Rodney Reynolds, your mortgage guy. If you have any other questions, my contact information is listed below. So please reach out to me. I’m available for any questions you may have. Have a great day.

Direct Line: 440-882-5403

Fax: 440-398-8173

NLMS # 190606 LO# 036126.000 MB# 803389.000

Interested in learning more about how you can grow into a mortgage when buying a home with today’s interest rates? Contact us today at (440) 628-1321

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If you are looking for a home in northeast Ohio, there are many options available to you. You can find suburban homes with large yards and easy access to highways, or homes in downtown Cleveland or Akron areas with close proximity to amazing restaurants and nightlife. No matter if you are looking to sell, build new construction, or buy resale, there is a reason to reach out to Realty Done to guide you through to your new destination with less stress and overwhelm.