Home Buyers: Get a Rate Stating in the 4s: (see #1) ➡️

We understand the importance of making homeownership affordable and accessible. We achieve this through our flexible, temporary buydown programs, which help lower mortgage payments during the initial years, providing immediate financial relief and making budgeting easier. This is NOT an Adjustable-Rate Mortgage (ARM) but a fixed mortgage rate that serves a strategic purpose and saves borrowers significant money.

Who Pays for the Buydown: (see #2) ➡️

A buydown works by setting aside funds into an escrow account at the time of closing. The funds can be allocated from several different sources but are often negotiated and paid for by the seller on behalf of a buyer. These funds subsidize the borrower's monthly mortgage payments during the buydown period.

How Does a Buydown Work:

Essentially, the lender temporarily reduces the interest rate by applying the escrowed funds to cover the difference between the standard payment and the reduced payment. This allows the borrower to enjoy lower monthly payments in the initial years of the mortgage, making homeownership more affordable upfront. Once the buydown period ends, the interest rate reverts to the standard rate, and the borrower resumes making regular payments.

Fun fact!

Did you know that if you refinance to a lower rate in the future or decide to sell your home before your temporary buydown period ends, you won’t lose the remaining funds? Instead, those funds will be applied directly to your outstanding balance, reducing your payoff balance.

It’s a win-win situation that offers flexibility and ensures you get the full benefit of your temporary buydown, whether you stay in the home or move on to your next adventure.

Breaking Down and Comparing Temporary Buydowns: (see #3) ➡️

First, you start with the regular mortgage rate you would qualify for based on your financial situation. Then, you select the length of the temporary buydown, and your interest rate will be lower for the first few years to help with initial payments. Once the buydown period ends, your rate will return to this regular fixed rate for the remainder of your loan.

• 1/1 Buydown: The interest rate is reduced by 1% during the first year of the mortgage. After that, it returns to the standard fixed rate for the remainder of the loan term. CLICK HERE to see an example.
• 2/1 Buydown: The interest rate is reduced by 2% (of your regular rate) during the first year and 1% (of your regular rate) during the second year. After that, it returns to the standard fixed rate for the remainder of the loan term. CLICK HERE to see an example.
• 3/2/1 Buydown: The interest rate is reduced by 3% (of your regular rate) during the first year, 2% (of your regular rate) during the second year, and 1% (of your regular rate) during the third year. After that, it returns to the standard fixed rate for the remainder of the loan term. CLICK HERE to see an example.

These buydown options allow buyers to choose the plan that best fits their financial needs. By reducing initial mortgage payments, these programs make homeownership more attainable upfront. Additionally, they offer the potential to refinance if mortgage rates decrease, ensuring long-term financial stability and savings.

Permanent Vs. Temporary Buydowns (see #4) ➡️

• What’s the difference?
• How do they benefit you?
• Why should you care?

Side-by-Side Comparison: Permanent Vs. All 3 Temporary Buydown Options: (see #5) ➡️

When comparing a permanent buydown to temporary buydown options, the savings are notably different. In the example attached, the permanent buydown reduces the interest rate slightly, leading to a small monthly payment decrease of $182.30. However, a 1/1 buydown offers greater monthly savings of $289.31, and even more savings are realized with a 2/1 buydown at $565.31 and a 3/2/1 buydown at $826.70 in the first year. This makes temporary buydowns more effective in lowering monthly payments initially, providing a more significant financial break for buyers during the initial years of a mortgage.

If you have any questions or need more information, please don't hesitate to contact us. We're here to help you every step of the way!

Ready to start your home journey? Click here to submit your loan application today!

Best regards,

Michael Thayer, CMPS, CMA

Guild Mortgage | Branch Manager

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