What is a 2-1 Buydown Loan?

Dated: October 23 2023

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How does it work?

It is a temporary mortgage agreement that provides a low interest rate for the first year of the loan, a somewhat higher rate for the second year, and the full rate the third year.

  • lowers interest rate for first two years, until it goes back to permanent rate
  • rate is typically 2% points lower in 1st year and 1% lower in 2nd year
  • Sellers and builders may offer the 2-1 buydown
  • 2-1 buydowns can be a good deal for homebuyers if their income is going to increase

*Bear in mind that this scenario doesn’t factor in taxes and insurance, so your actual monthly payment amount will vary, but you can see the difference between years 1 and 2 versus year 3 and after. 

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Stephanie Albright

Palm Beach County Realtor - AI-Powered Marketing Specialist - #1 RE/MAX Prestige ALL STAR Jan. 2026 With over 24 years of experience and recognized as the #1 RE/MAX Prestige ALL STAR for Januar....

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