2-1 Buydown Program

The 2-1 Buydown Program lowers the borrower’s interest rates for the first two years of their mortgage. Available for conforming 15-year and 30-year fixed rate mortgages, the borrower is qualified based on an approved and contracted interest rate prior to the 2-1 rate reduction. The seller will fund the temporary buydown, which must be included in the purchase contract and negotiated by the real estate agent during the offer process. The lump sum is held in a custodial escrow account and is applied to the buyer’s monthly payments. As a result, the buyer will have a reduced monthly payment for the first two years with the difference coming out of the escrow account.

Let’s look at an example below using a 30-year fixed rate mortgage for $450,000 at a contracted 6.50% interest rate (excluding any property taxes, home insurance payments, or other costs included in the monthly payments).