What is a 2 1 buydown
Hey, everybody. I want to try and dispel some of the missing confusion around, too, one by down. First of all, what is a 2-1 by down? Well, during a time when interest rates are high like they are now, there’s an opportunity to have a lower interest rate and payment for the first two years and someone else can pay for it.
Let me jump right into it’s a little bit longer, a normal video, but I’m going to go first. Let’s presume an 800,000 our loan amount 30 year fixed six and a quarter percent. APR 6.37. If you want a specific rate quote, let me know. Here’s how it works. This is your interest rate, six and a quarter percent. The first year you can have an interest rate of four and a quarter percent, 2% lower than that rate.
Monthly payment. $3935. In the second year, your interest rates going up 1%, five and a quarter percent. That monthly payment, $4417. And in the third year through the next 30, you’re going to have an interest rate, six and quarter percent payment of $4925. Here’s a secret source. The lender for the first year is going to take the difference of the six and a quarter percent payment of $4925.
Subtract it from your first year’s payment. $3935 And you’re going to save $990 a month for your first year. In the second year, they’re going to take the same formula, the payment $4925, minus your second year payment of $4417. You’re going to save $508 a month in the second year. How do you pay for it? Well, the lender is going to take your $990 a month savings, multiply times 12.
It’s almost $12,000 in the first year. You’re going to pay $12,000 less. Same formula for the second year, you’re going to pay about $6,000 less. What does that mean for the first two years? You’re going to save almost $18,000 in payments and to negotiate your offer with the seller. You can get them to pay for.
If you have any questions about a specific scenario reach out to me any time. Thanks.
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