Guest Blog by: Daniel Boxman of Think Mortgage
In today’s current rising rate environment, many buyers are taking advantage of the 2/1 rate buydown. This loan product has been available for a while but has gained popularity over the last month or two due to the increase in mortgage rates. The 2/1 buydown gives buyers the ability to lower their interest rate 2% below the current market rate for the first 12 months of their mortgage payments and 1% below for the next 12 months before the rate increases to the current market rate in which the loan was locked.
For example: if the current market rate is 6.75% and the buyer uses the 2/1 buydown, their first 12 mortgage payments will be at 4.75%. Their next 12 payments will be at 5.75% and on the 3rd year of payments until that loan is paid off, the rate will be 6.75%. The advantage of this over an adjustable-rate mortgage is that the adjustment of the rate can not increase past the market rate in which the loan was initially locked, even if the current rate environment at that time has a market rate of 9%. Most analysts will predict within the next 2-3 years, especially with a (perceived) recession and a presidential election coming, rates will drop. At this time, the client can refinance and take advantage of the new lower rates without ever having to pay today’s rate. An average buyer in NYC will save close to $600 a month in their first year of mortgage payments.
Please contact me to learn how to structure your 2/1 buydown and see what your actual monthly savings can be!
- Daniel Boxman of Think Mortgage
NMLS #1077102
Posted by Tom Crimmins Realty on
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