What's the benefits of 2/1 buydown in our situation..?

[Hyeonji Oh]

I’m trying to buy a house in Phoenix using a second home loan, putting 10% down.

I'm trying to understand why anyone would choose the 2/1 buydown if you end up paying the same amount of money, whether you select the 2/1 buydown option or not. Personally, I have no issues making the full monthly payments from the start, so it seems unnecessary to pay the buydown payment just to have lower payments in the first two years.

Additionally, my lender said that if I refinance before the 2-year period is over, the remaining buydown payment would be applied to the principal. This essentially makes the buydown payment no different from just paying the money upfront. So, I'm left questioning what benefits there are to the 2/1 buydown that would make it a recommended option.

I'm thinking that if I skip the 2/1 buydown, the cash to close would be lower, meaning I'd need to put in less of my own money upfront, which seems like a better option to me. I’m just wondering if there’s something I might be overlooking in this reasoning. 😄

[Hyeonji Oh]

Quote from @Derek Brickley:

Hey Hyeonji!  

You are 100% on the right track. 2-1 buydowns are attractive options offered by sellers/builders to help improve monthly affordability but in all reality you aren't saving anything.  Temporary buydowns are best for when the seller is covering all of your closing costs already and you want to use additional funds from the seller.  Actually you might see a slight additional cost on your rate when using a temporary buydown.  

Temporary buydowns are a better option than a permanent one with today's market, but you are better of using those funds to cover as much of your true costs as possible.

Thank you so much for your explanation. I really appreciate it! I decide not to do a buy-down.