Temporary buydowns can be a strategy for buyers to access lower mortgage payments initially, providing initial payment savings. Sometimes it can be negotiated that the seller funds these temporary buydowns to make the property more attractive to buyers.
While not popular in the highly sought-after communities of La Canada, La Crescenta, Glendale, Burbank, Toluca Lake, and Pasadena, sellers may consider this tool for a difficult-to-sell home.
Here’s a summary of the three most common options:
3-2-1 Buydown:
Reduces the buyer’s interest rate by 3% for the first year.
Reduces it by 2% for the second year.
Reduces it by 1% for the third year.
2-1 Buydown:
Reduces the buyer’s interest rate by 2% for the first year.
Reduces it by 1% for the second year.
1-0 Buydown:
Reduces the buyer’s interest rate by 1% for the first year.
These buydown options offer buyers added flexibility in the initial years of homeownership, allowing them to use the extra cash for home improvements or unexpected expenses. It’s a way to make homeownership more manageable in the early stages of the mortgage.
