Temporary Interest Rate Buydown

Buying a home in a rising inflation and interest rate market can be tough, but we're here to help with a Temporary Interest Rate Buydown.

What is a Temporary Interest Rate Buydown?

There are 2 Temporary Interest Rate Buydown options, the 2-1 and the 1-0. The 2-1 buydown reduces your interest rate by 2% the first year of your loan and 1% the second year before reverting to the original interest rate you had locked in the third year. The 1-0 buydown works the same way, but only reduces your rate by 1% for one year.

The difference between what your payment would normally be (at the interest rate you originally locked in), and the adjusted, bought down rate is paid for by concessions from the seller, builder, and or real estate agents.

As the market gradually pivots from a strong seller's market to becoming more favorable towards the buyer, sellers, builders, and real estate agents are increasingly offering concessions (money to be used towards the home purchase), to entice buyers. These third party funds can be used to temporarily buydown your interest rate. The concessions are placed as a lump sum in an escrow account and used to cover the difference in monthly payment between the original interest rate and the adjusted one. This benefits the buyer by effectively lowering their interest rate for the first year/s of their loan.

What happens if I refinance before the rate reverts back to the original rate?

The unused funds in the buydown escrow account can be applied towards the closing costs for your new loan, or used to purchase discount points to obtain a lower interest rate.

To recap, the Temporary Interest Rate Buydown is a program in which the effective interest rate is reduced for the initial years of the loan. At closing, a third party (seller, builder, and/or real estate agent), places a lump sum into a buydown account used to cover a portion of the client's interest during the buydown period.

What occupancy and loan types are eligible?

The buydown is available for Primary residences, and Second homes. FHA and VA eligibility is for Primary residences only.

Fixed rate loans are eligible, but ARM (Adjustable Rate Mortgages) are not.

Can the buyer use their own funds for the Temporary Buydown?

No, unfortunately this is not permitted at this time.

Don't hesitate to reach out for more information or to see how you could benefit from this program.