With rates around 6.1%, a lot of buyers are asking about buydowns. Here's the real math.
What's a 2-1 buydown?
Year 1: Rate is 2% below your note rate (so ~4.1%)Year 2: Rate is 1% below (so ~5.1%)Year 3+: Full rate kicks in (6.1%)
On a $600K loan, that saves roughly $700/month in year 1 and $350/month in year 2. Total savings: about $12,600 over two years.
The cost: Usually 1.5-2% of the loan amount ($9K-12K on $600K). Often the seller pays it as a concession.
When it makes sense:
If you plan to refinance when rates drop (you get the savings now and refi later)If the seller is willing to contribute to closing costsIf cash flow in years 1-2 matters more than long-term rate
When it doesn't:
If you're staying 10+ years and rates never drop. you're better off buying permanent points
I'll model both scenarios for your specific deal.
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