How Does a 2-1 Buydown Work? (REALLY) | Pros, Cons, Alternatives

[@delicioussam327]

I really appreciate this video. Thank you.

[@workshopmortgage]

You're welcome! I'm happy you found the video helpful!

[@kenjiswb1499]

Thank you. I read that you actually loose money using the 2-1 BD? Not just from the fact that it’s your money you are getting back?

[@workshopmortgage]

Hi Kenji! One of the things I like most about 2-1 buydowns is that (with most lenders) you will definitely get a benefit for every penny of money held in the buydown subsidy account. It'll either discount your monthly payment according to the schedule you set up with your lender or, if you pay the loan off before the end of the buydown schedule (refinance, sell, win the lottery), it'll be credited toward your principal balance. This is not the case if you pay points to buy your rate down permanently. Points are non-refundable. If you don't keep the loan long enough to recoup the cost, that's not something you can fix retroactively. (I made a video that talks more about points and how to make sure you're making a good decision. It's here, if you want to learn more: kzbin.info/www/bejne/rXa4hKx7m7uBiqM ) When it comes to temporary buydowns, there are two things to look out for: 1) Lenders are not required to credit unspent subsidy funds back to you if you pay the loan off before the end of the subsidy term. So be sure the lender you are working with does! 2) It's pretty common for a loan with a temporary buydown to cost just a little more than a loan without a temporary buydown. Setting up and administering the buydown account takes some extra effort on the part of your lender, so usually they charge a little extra to make up for that cost. .1% to .25% of the loan amount is pretty common. This cost would just be incorporated into your "points" (again, see that video above, to learn more about points). If you have any other questions, let me know... either here, or you are welcome to text or call (503-799-3711) or email me ([e-mail]).