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Updated almost 2 years ago on . Most recent reply
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2 1 Rate buydown
So, I've come across 2-1- rate buydowns a few times recently. I understand the general concept of it don't really understand the mechanics of how it works. I was hoping someone could explain how you work this into a contract and how it actually works.
Thanks in advance.
Christopher Woodland
Most Popular Reply
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@Christopher J Woodland
It’s a pointless tactic that mortgage brokers are using to make uneducated buyers feel good about getting a “good rate”.
There is zero tactical benefit of this unless you think the dollar will be losing value within those 2 years.
If you compare it to no seller assist or seller concessions obviously it’s better. But you’re asking the seller for a price reduction on their end to go towards your rate for the next 2 years. If you look at the costs vs savings if the seller pays 5k toward the 2/1 Buydown in those 2 years you’ll save exactly 5k or less. So you are giving the mortgage company a 5k loan with negative interest for 2 years.
The alternative is getting the seller assist/ seller concessions toward your closing costs. 5k today is more valuable than 5k 2 years from now.
The much better alternative is get a seller assist