2-1 Buydown Pros and Cons

Thinking about a 2-1 buydown? Here's an honest look at the advantages and disadvantages.

✅ Pros of a 2-1 Buydown

1. Lower Initial Payments

Your payments are significantly reduced for the first two years:

• Year 1: ~$500/month savings
• Year 2: ~$250/month savings

2. Easier Qualification

Some lenders qualify you at the Year 1 rate, making it easier to afford more home.

3. Cash Flow Flexibility

Extra monthly cash in years 1-2 can go toward:

• Building emergency fund
• Home improvements
• Paying down other debt

4. Usually Seller/Builder Paid

In most cases, you don't pay for it - the seller or builder does as a concession.

5. Refinance Opportunity

If rates drop significantly in 2-3 years, you can refinance and never pay the full rate.

6. Income Growth Alignment

Perfect if you expect raises or promotions that will cover the higher payment later.

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❌ Cons of a 2-1 Buydown

1. Payment Shock in Year 3

Your payment jumps significantly when the buydown ends. Example:

• Year 2: $2,398/month
• Year 3: $2,661/month (+$263 increase)

2. Doesn't Reduce Total Interest

Unlike discount points, a buydown doesn't lower your long-term costs - you still pay the full rate eventually.

3. Opportunity Cost

That $9,000+ buydown cost could have been:

• A price reduction
• Closing cost credits
• Rate buy-down with points

4. Refinance Risk

If rates don't drop (or rise), you're stuck paying the full rate without an easy exit.

5. Qualification Confusion

Some lenders qualify at Year 3 rate anyway, eliminating one key benefit.

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Quick Decision Matrix

Situation	Recommendation
Seller offering concessions	✅ Consider buydown
Expecting income growth	✅ Good fit
Planning to refinance in 2-3 years	✅ Good fit
Need lowest possible long-term rate	❌ Choose points instead
Unsure you can afford Year 3 payment	❌ Risky
Paying for it yourself	⚠️ Calculate ROI carefully

Calculate Your Specific Situation

Use our 2-1 Buydown Calculator to see exact numbers for your loan.

Or compare options with Is a 2-1 Buydown Worth It?

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