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Marry The House/Date The Rate With a 3-2-1 Buydown

Marry The House/Date The Rate

The idea is relatively straightforward, you buy a home you really want regardless of available financing terms.

The mortgage rate you receive, even if high today, isn’t your forever rate because you can always refinance down the road.

  • Marry The House

A lot of homeowners buy a particular piece of property because they fall in love with it and it can be an emotional decision. There’s also a presumption that many people buy a forever home that they plan to keep, well, forever. Simply put, they plan to stay in the property for the long haul, and as such are essentially marrying this home.. After all, a marriage is expected to continue, not just last a year or two.

  • Date The Rate

You don’t have to keep the same home loan, even if you keep the house. Assuming there isn’t a prepayment penalty, you are openly free to refinance your mortgage at essentially any time. For example, if you bought a home in 2008 when 30-year fixed mortgage rates averaged around 6%, you might have refinanced into a new 30-year loan at 3-4% a few years later.

You also may have refinanced again a few years after that when mortgage rates hit record lows, dropping into the mid2% range. In other words, you were not staying faithful to your original home loan or your mortgage lender/servicer. Why would you if interest rates drop by 50%?

A Practical Way To Do This Is With The 3/2/1 Buydown


3-2-1 buydown: A buydown of 3% in the first year, 2% in the second year, 1% in the third year, then back to the original locked rate in the fourth year for the duration of the term.

  • A 3-2-1 buydown mortgage is a type of loan that starts out with a low-interest rate and rises over the next several years until it reaches its permanent rate. Here are some important points to keep in mind:
    • With a 3-2-1 buydown mortgage, the borrower pays a lower interest rate over the first three years in return for an up-front payment to the lender.
    • The interest rate is reduced by 3% in the first year, 2% in the second year, and 1% in the third year. For example, a 5% mortgage would charge just 2% in year one.
    • After the buydown period ends, the lender will charge the full interest rate for the remainder of the mortgage.

    Buydowns are often used by sellers, including home builders, as an incentive to help buyers afford a property. Here’s an example:

Is a 3-2-1 Buydown Mortgage Right for Me?

If you will need to pay for the buydown on your own, then the key question to ask yourself is whether paying the cash upfront is worth the several years of lower payments that you’ll receive in return. The question is easier to answer when someone else is footing the bill for the buydown. The goal is to use the seller concessions for that buydown, by doing that, the buydown would be a success.

If you have any questions make sure to contact Scarlett Roger at 813-360-2806