You are probably excited to close on your home, but you may have also seen that your interest rate might be a bit higher. If you are looking for a way to save money, particularly if you have a lot of work to do on the home, you might be looking for a way to reduce your interest rate during the first couple of years. One option is to perform a 2-1 buydown. What do you need to know about this option, and how do you know if it is right for you?
How A 2-1 Buydown Works
This is a special type of program that can help you slightly alter the financing on your home loan. Specifically, it has been designed to reduce the interest rate during the first two years of your mortgage. During the first year of your mortgage, your interest rate is reduced by 2 percent. Then, it is reduced by 1 percent during the second year. By the third year, the interest rate goes back to normal.
The Benefits And Drawbacks Of 2 – 1 Buydowns
Like any financing option, there are some benefits and drawbacks to consider. The biggest benefit is that you can save money during the first two years of your mortgage. This can provide you with extra money to complete renovation projects and home repairs. On the other hand, the drawback is that your monthly payments will go up during the first few years. If you don’t have the income to match your monthly payments during the third year, you might find yourself in some financial difficulty.
Should You Do a 2 – 1 Buydown?
You may also be interested in this type of financing option if you plan on selling the house in the near future. For example, if you think you won’t be there for very long, you may not care what the interest rate is going to do in the future. On the other hand, if you really plan on selling the house quickly, you may want to talk to a professional about other financing options that could be even better for your specific situation. That way, you don’t end up paying more money than you have to.
As you take a look at your mortgage options, you might find that a conventional mortgage presents a few qualification challenges. Fortunately, there are other options available, and you might be able to pursue an ITIN loan. This stands for Individual Tax Identification Number, and Individual Tax Identification Number loans could be beneficial for people cannot get approved for a qualified mortgage. What do you need to know about the process?
