Use a 2:1 Buydown Loan to reduce homebuyer interest rates

Article last updated July 2023

What if you could save $14,000 when buying your home, even with how harsh the market is right now due to high-interest rates? Here’s how.

Traditionally, you buy a home on a 30-yr fixed interest rate mortgage. But there’s an alternative known as a 2-1 Buydown Loan.

This gives you a lower interest rate for the first two years.

2% lower year 1.

1% lower year 2.

So let’s do some math – say you are trying to buy a house valued @ $650,000 at a 6% interest rate.

(Have the next bit side by side on screen or on paper in the edit.)

On a 30yr fixed mortgage, you’d be paying roughly $4400 a month. But on a 2-1 buydown loan on that same property:

Your first year’s monthly payment at 2% lower, is 4% total interest which is roughly $3600 a month, an $800 monthly savings.

Your second year’s monthly payment at 1% lower, is 5% total interest, which is roughly $4000 a month, a $400 monthly savings.

Over the 2yrs, that’s roughly $14,000 in savings. Now think of what you could do with that money.

Hint hint, you either just pay more on your home to pay it off faster and build equity, OR you invest it.

How to use a 2:1 Buydown

When you find a home and you’re ready to put in an offer, ask your realtor to ask for a seller credit that can be applied to a 2:1 Loan Buydown.

About the Author

Montana Gabrielle Hooks is a SF Bay Area Realtor in the East Bay. Local entrepreneurship, playing bass guitar and singing live karaoke are a few of her favorite things. She serves on the Young Realtists Division, Oakland board is a member of the Associated Real Property Brokers. Follow her on Instagram or learn more about her on her website.