2-1 Buy Down & Rate Buy Down
I wanted to share a few things you can ask the seller during negotiations.
A 2-1 Buy Down is a type of mortgage discount point where the borrower pays an upfront fee to the lender in exchange for a lower interest rate on the mortgage loan for the first two years. After the initial two-year period, the interest rate on the loan reverts to the original rate.
A Rate Buy Down, on the other hand, is a mortgage discount point where the borrower pays an upfront fee to the lender in exchange for a lower interest rate on the mortgage loan for the entire term of the loan. This can reduce the monthly mortgage payment and overall interest paid over the life of the loan.
How to use a 2-1 Buy Down & Rate Buy Down
Determine if you are eligible for the mortgage discount point and the associated interest rate reduction.
Calculate the cost of the discount point and compare it to the potential savings from the lower interest rate.
Decide whether the upfront cost is worth the long-term savings.
Notify your lender that you want to use a 2-1 Buy Down or Rate Buy Down, and pay the upfront fee.
Enjoy the lower interest rate and lower monthly mortgage payments, and keep in mind when the discount period will end.
Overall:
It's important to note that these types of mortgage discount points may not be the best choice for everyone, and you should carefully consider your financial situation and goals before deciding to use them. It's also a good idea to consult with a financial professional or your lender for guidance on whether a 2-1 Buy Down or Rate Buy Down makes sense for you!