How does a 2-1 buydown work?
Answered by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
A 2-1 buydown lowers your rate by 2% in the first year and 1% in the second before settling at the full note rate in year three. The cost is paid upfront, often by the seller or builder.
It eases you into the payment and is popular with Florida builders offering incentives. If rates fall, you can refinance during the buydown period. We'll structure the seller credit to fund it.
Two years of relief
A 2-1 buydown lowers your rate for the first two years of the loan. Year one is 2% below your note rate, year two is 1% below, and from year three on you pay the full rate.
It gives you a lower payment early, which helps as you settle into a new home and its costs.
Who pays for it
The buydown is funded upfront, often by the seller or builder as a concession, and held in an escrow account that covers the difference each month.
It is a popular way for sellers to help buyers in a higher-rate market. Reach out and we will see if a 2-1 buydown fits your deal.