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Don’t let higher interest rates lock you out of a new home. There are many strategies that may help you afford the home you really want even when interest rates are rising.
One is the 2-1 buydown and here’s how it works.
At closing, your seller credits you with money to pay for “discount points”. Points for this program are used to reduce or buy down your initial interest rate.
The interest rate for the first year is a full 2% lower. The second year its 1% lower. After the second year and through the remainder of your loan, you will pay the regular rate selected at purchase. No surprises! And if rates fall in the meantime, you can refinance.
A 2-1 buydown brings many advantages, with a lower interest rate, you may put the home you really want within reach. You enjoy lower payments for the first two years you live in your home. You pay down your loan balance faster. Plus, you may be able to deduct the cost of points paid from your taxes, even when your seller pays them.
In some cases, buyers offer to pay sellers a higher price in return for paying the 2-1 buydown. It’s a win-win-win! Buyers save because the larger loan amount usually adds less to the monthly payment than a higher rate would, even at a lower sales price.
Sellers can still receive the same net price for their home, plus buyers and sellers support positive value trends in the neighborhood.
If a 2-1 buydown is the key do your ideal purchase, let’s talk about this and other strategies to get you where you really want to be – your new home!
Information courtesy of:
Don Bleuenstein
Broker – Owner | NMLS 131338
(248) 318-2394
[email protected]
1937036
www.gemhomeloans.com
Gem Home Loans
71 Walnut Suite 204 | Rochester, MI 48307
