Pros and Cons of 2/1 BUYDOWN

[Matthew Kwan]

Pros and Cons of a 2/1 Buydown

Just wanted to kindly share some things I learned on 2/1 buydown which is a very useful tool to use for today's market and to acquire RE with a loan.  The major advantage of a 2/1 buydown is saving on monthly payments, but there are other advantages (and disadvantages) of getting a 2/1 buydown deal.

Advantages of a 2/1 buydown

• Ease into homeownership: Many people aren’t acclimated to the responsibilities of homeownership, so a smaller monthly price may offer some relief.
• Saving money: In addition to lower monthly payments, there is also the added benefit of having more disposable income each month. This could be used to pay down the principal, finance home improvements, or help achieve other financial goals.
• Larger mortgage: With temporarily lower monthly payments, you may be able to afford a larger mortgage, which means you can buy a more expensive home.

Disadvantages of a 2/1 buydown

• Higher upfront costs: Compared to other mortgage loans, the 2/1 buydown has higher upfront costs as the seller pays the fees.
• Increased payments: Some homeowners may discover that they are stretched too thin by the third year and are forced to sell their property to make ends meet. (that's where the refinance kicks in where unused portions can be refunded)

@Albert Bui @Carlos Valencia