What is a 2/1 Buydown?

Posted: October, 28, 2022 | Categories: Finance

With interest rates rising, some may be thinking about how they can afford the monthly payments that come with a mortgage and buying a home. At McCaffrey Homes, we’re making it easier for our buyers to still get their dream home by offering a 2/1 buydown.

A 2/1 buydown is a mortgage loan option where your interest rates are reduced for the first two years of the loan. By the third year of the home loan, the interest rate goes back to the original rate for the remainder of the loan. This means that in the first year, your interest rate will be 2% less than the original rate. In the second year, your interest rate is 1% less. This saves you thousands of dollars in interest charges! 

For example, if your interest rate on a 30-year mortgage rate is 7%, you would pay:

  • 5% in Year 1
  • 6% in Year 2
  • 7% Fixed in Years 3-30

2/1 buydowns are available on both FHA and conventional loans, and for those first two years, we cover the difference in what your payment would normally be. This gives you lower monthly payments for the first 24 months, letting you ease into your mortgage payments over time. 

This program can also be helpful if your income is rising from year to year, so you’ll be able to afford a full mortgage payment within two years. In addition, lower monthly payments in the beginning will give you more money to cover initial costs like moving expenses, new furniture, and home décor.

And while mortgage rates have been rising quickly, it’s important to note that rates are still lower than they were for 30 years from the 1970s all the way through the early 2000s. In the early 1980s, homebuyers were paying rates of more than 18 percent. So now may be a good time to take advantage of our 2/1 buydown program!     

Interested in finding out more? Contact McCaffrey Home Mortgage at (559) 256-7050 for information on the program or any questions you may have. We want to provide options to help make buying your new McCaffrey Home affordable!