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2-1 Buydown

By now you may have heard about the popular 2-1 buydown that lenders are offering. Today we have a strategy for you to capitalize with this and save more money on your new home! The 2-1 buydown refers to using seller concessions to fund an escrow account and the lender will give you a 2% rate reduction in the first year and 1% rate reduction in the second year. This reduces your payment in the initial years of the loan. So here is the strategy – first, you negotiate for seller concessions to take advantage of the 2-1 buydown. We often advise using those for closing costs but they’ll fund the buydown here. So for the closing costs, the move is to actually take a higher rate than par to use lender credits to cover your closing costs. Now you’ve eliminated closing costs and your payment will be more affordable short term. Experts are predicting rates to tick down over the next year or two. So when rates drop, you refi to secure a lower payment and upon refinancing, you will also receive any funds still in escrow from the 2-1 buydown. We’re talking lower payment and less cash out of pocket upfront, then potentially a better loan in a year with some extra cash heading your way – all using other peoples money!