Living in an inflated market, mortgage rates have steadily increased. However, while rates are higher, that does not necessarily mean buyers have to wait to purchase a home. A solution that has been growing in popularity is a temporary buydown, which allows buyers to purchase their dream home without putting additional pressure on their bank account.
What is a Temporary Buydown?
A temporary buydown is when a party in a mortgage loan transaction (such as a seller or a builder) pays to have the interest rate temporarily lowered for the first few years of a mortgage. Buyers are qualified for the loan with the long-term permanent interest rate, but receive a lower interest rate temporarily.
One of the most popular buydown types is the 2-1 buydown, where the interest rate is lowered by 2% for the first year of the mortgage and then 1% the second year. Then, by the third year, the interest rate goes back to normal.
Will a Temporary Buydown Help a Homebuyer?
This mortgage type ultimately helps buyers manage mortgage payments. If you are interested in purchasing a home, but worried about the recent increase in interest rates and how it would affect your monthly payment, then a buydown could help in the short-term and free-up cash. Many buyers will put the extra funds towards home improvements, purchasing furniture & appliances, or landscaping.
How Can I Start the Process?
The best thing home buyers can do right now is sit down and talk to a Mortgage Planner about your options. We want to help buyers in this current market however we can, helping you find a solution tailored to you and your family’s needs. Contact one of our experienced and local Mortgage Planners to learn more and to start the pre-qualification process.
SVP Mortgage Banking