Never. Stop. Learning. 20 years around mortgages and just discovered 2x1 Buydowns!

[AJ Wong]

As primarily a buyer's broker the increase in mortgage rates has clearly made some investments and property purchases prohibitive. 

One part of the solution could be a 2x1 mortgage buy down. As I understand it, buyer's can pre pay interest (often with a seller's credit) to obtain an interest rate and mortgage payment that is a full 2%! lower(than the qualifying rate) for the first year and a full 1% lower for the second year. So for example a 6.75% 30 year mortgage would be based on 4.75% for the first year and 5.75% the second often at a cost of 1%ish of the loan amount. Generally these programs are without pre payment penalties and any unused portion during the first 24 months will be reduced off the principal balance if refinanced. 

When used in combination with a seller's concession this seems like a very effective way to reduce costs and improve cash flow for the next two years, while optimally inflation settles and interest rates come down. Buyer's can then hypothetically either refinance or keep their 6.75% rate often with a marginal increase in total loan balance. 

WIth inventory rising and sellers seeing less activity intensity there is often ample room for concession negotiation. We recently helped a BP investor get a full 3% on a Triplex, no issues with the appraisal. 

Although I've been around mortgages since 2004 I was still unfamiliar to the types of buy downs available. Anyone else only aware of the conventional permanent buy down (which is often not worthwhile in the current rate environment)? And often only yields a 1/8 or 3/8 less rate? 

Anyone utilizing this for personal or client investment or property purchases? 

Other lender tidbits or niche programs that others are seeing utilized more frequently? 

[Steve Vaughan]

@AJ Wong good to know.  

A friend of mine has a local KW brokerage and similar is his specialty now.  Partnered with a lender to do a 3yr ladder up buydown but it's more than 1pt.  2+ is my guess,  targeting seller concessions.