What is a 3-2-1 Buydown?
As the interest rates facing potential homebuyers climb, many new and veteran hopefuls are looking into alternative options to the traditional mortgage arrangement. Arrangements that can lower those rising interest rates – even temporarily – are becoming more and more attractive to home-owning hopefuls. With the support of the real estate professionals at South Philly Real Estate Team, finding the right option for your situation will be a breeze. And while there are many options available to homeowners looking to save on their interest rate, we’re going to focus here on the 3-2-1 buydown.
Breaking down a 3-2-1 Buydown
To put it simply, a 3-2-1 buydown reduces the interest rate on your mortgage for the first three years of payments. The first year is reduced by 3%, the second by 2%, and the third year by 1%. As you might guess, with Philadelphia interest rates resting just shy of 7% at the time of this article’s publishing, it’s easy to see why a 3-2-1 buydown would appeal to those looking to save more money on their home purchase. This is a great program for people seeking to build up a bit of a nest egg or otherwise simply free up some extra cash before settling into their full interest rate in three years’ time.
Another important facet of the 3-2-1 buydown is that it requires an upfront fee to be paid to the mortgage lender – but don’t panic! This fee can be paid by many different parties – the buyer, the seller, the mortgage lender, or even the buyer’s employer (as some companies will front the cost of a 3-2-1 buydown to assist in their employees’ relocation efforts). When you partner with South Philly Team, however, you won’t be required to pay for the upfront fee of the 3-2-1 buydown, as the sellers we work with cover the cost! So, you can take full advantage of this fantastic deal without having to worry about coming up with cash enough to cover the cost of 3-2-1 buydown, empowering you to save even more on your new home.
There are a few more considerations to keep in mind before you commit to pursuing a 3-2-1 buydown for your next new home. Of course, you will still have to be approved for your loan’s initial rate – the one you’ll be paying after the three years of discounts the 3-2-1 buydown provides runs out. You should also note that however great a savings a 3-2-1 buydown might net you, this program is only eligible for primary or secondary homes and cannot be applied to investment properties or be combined with an adjustable-rate mortgage (ARM) with an initial period of less than five years’ time.
Take Advantage of a 3-2-1 Buydown
If you’re worried about purchasing a new home and being left without any financial cushion, a 3-2-1 buydown might be just the program for you! You will enjoy three years of discounts on your rate, allowing you to shore up your savings while you ease into your permanent interest rate. Whether you want to use the extra cash to spruce up your new home, pursue any needed repairs, or just want to do something fun for you and the family – the 3-2-1 buydown will help free up more of your funds for when you need it most.
Buying a home doesn’t have to clean out your savings account! Finding the right program for your situation can be difficult, but South Philly Real Estate Team is here to help you explore the options available to you. You’re encouraged to reach out to us whether you’re ready to begin the hunt for a new home or are still just considering your options and wondering if a 3-2-1 buydown is the right fit for your situation. We can be reached by phone at (215) 360-3434 or by filling out our online new home buyer form. We look forward to hearing from you!