A real estate feature that is great for buyers. A real estate feature that is great for sellers. The 2-1 interest rate buydown

When mortgage rates are high – like they are today – you can use a 2-1 interest rate buydown to obtain a lower mortgage rate. And a lower mortgage payment.

The 2-1 interest rate buydown is a home loan feature whereby funds are set aside in an escrow account at the closing. These funds are set aside for the benefit of the buyer. The escrowed funds enable the buyer to “buy down” their interest rate for the first two years. In year one, the buyer’s interest rate will be 2% lower than the 30-year rate. In year two, the buyer’s interest rate will be 1% lower than the 30-year rate.

The 2-1 interest rate buydown is simple. It’s a 2% interest rate reduction in year one. It’s a 1% interest rate reduction in year two.

In years 3 through 30, the buyer’s interest rate remains the same. The buyer’s mortgage payment will remain the same as well. The buyer’s interest rate in years 3 through 30 – as well as the buyer’s mortgage payment in years 3 through 30 – is established when the buyer locks their rate.

The 2-1 interest rate buydown provides a buyer with an opportunity to qualify for a larger loan amount. This increases the number of homes the buyer can go out and look at.

By using the 2-1 interest rate buydown, a buyer can purchase a larger home. A buyer can purchase a more expensive home. A buyer can purchase a home with more “bells and whistles.” All are nice options. Possible, through the use of the 2-1 interest rate buydown.

What does a 2-1 interest rate buydown cost?

The cost of the 2-1 interest rate buydown is equal to the difference between principal and interest payments – based on the 30-year rate, which goes into effect in year 3 – and the principal and interest payments on the bought-down, lower rate in year 1 and year 2. Escrowed buydown funds are paid at the closing. Paid by the seller. Held in escrow. For the benefit of the buyer.

You are thinking about selling your home. How can the 2-1 interest rate buydown help you, as the seller? Let’s look at a few situations…

When the housing market is softening. When higher numbers of sellers are listing their homes for sale. When the housing market shifts from a seller’s market to a buyer’s market. When you see price reductions. When homes are sitting on the market – unsold – for longer periods of time. In each situation, the 2-1 interest rate buydown is an attractive tool that can be used by a seller to attract more buyers.

Over the past few years, mortgage rates have remained stubbornly high. When mortgage rates are high – like they are today – buyers who may be thinking about purchasing a home are also thinking about those higher mortgage rates. Higher mortgage rates = higher mortgage payments.

The 2-1 interest rate buydown lets a buyer get into the home they want today, with an interest rate during the first two years that will be closer to the lower mortgage rates buyers were used to seeing a few years ago. Lower mortgage rates buyers are eagerly waiting for. Mortgage rates…that are just not getting much lower.


Families hoping to purchase a home are taking notice of higher mortgage rates. Higher mortgage rates place pressure upon family budgets. This affects whether a buyer will decide to submit an offer to purchase a home. Which in turn, affects prices sellers get for homes they are selling. All being good reasons to consider using the 2-1 interest rate buydown. The 2-1 interest rate buydown benefits buyers. The 2-1 interest rate buydown benefits sellers.


Through the 2-1 interest rate buydown, as the seller, you offer your buyers the benefit of the lower mortgage rate. And the lower mortgage payment too. In year one. And in year two.

As the seller, by offering your buyers a lower mortgage rate for the first two years, you will attract more buyers to your home. Because your home is being sold with the 2-1 interest rate buydown. Because your home is being sold with a lower mortgage rate. Because your home is being sold with a lower mortgage payment. For two years. As the seller, this positions your home – which is being presented to buyers, with the 2-1 interest rate buydown – as an attractive option. Especially when compared to other homes on the market that buyers may be looking at. Because those homes don’t provide buyers with a lower mortgage rate in year 1 and year 2. Because those homes don’t provide buyers with a lower mortgage payment in year 1 and year 2. And yours does!

The 2-1 interest rate buydown. It’s great for sellers. The 2-1 interest rate buydown. It’s great for buyers.