What is a Buydown Mortgage?
A buydown mortgage allows you to receive a lower interest rate for at least the first few years of the mortgage, or possibly its entire life. The borrower pays an upfront fee to reduce the interest rate on their loan, which is paid in the form of points – a percentage of the loan amount. For example, a borrower might pay two points (2% of the loan amount) to reduce their interest rate by 1% for the first three years of their mortgage. This can be an effective way for borrowers who want to lower their monthly mortgage payment in the short term or expect their income to increase over time.
Benefits of a Buydown Mortgage
Not sure which loan product makes the most sense for your financial situation? Here are some advantages to fixed-rate mortgages from Traditions Mortgage:
- Lower Monthly Payments: By paying points to reduce the interest rate on their loan, borrowers can lower their monthly mortgage payments. This can be especially helpful in freeing up some extra cash each month.
- Increased Buying Power: By reducing their monthly mortgage payments, borrowers may be able to qualify for a larger loan, allowing them to purchase a more expensive home.
- Fixed Rate: Buydown mortgages are typically available in fixed-rate form, which means the interest rate and monthly payments will remain the same throughout the term of the loan. This is a good option for borrowers who want the stability of a fixed-rate mortgage, with short-term financial relief.
If you’re considering purchasing a new home in the future, the first step is to speak with a Traditions Mortgage lender about the price range that is feasible for your income and lifestyle. If you’re like most homebuyers, you don’t have thousands of dollars on hand for out-of-pocket closing costs or hefty down-payments. That’s okay! Our team of local Mortgage Partners in York, Hanover, Lancaster, Camp Hill and the Capital Region can help you through every step of the mortgage process.
Your Local Mortgage Lender in Central Pennsylvania
At Traditions Mortgage, we are dedicated to assisting our customers with the home buying and refinancing process. If you feel that a buydown mortgage is best for you, call one of our local Mortgage Originators today.