How a 2–1 Buydown Helps Houston Home Buyers Save Money

High interest rates give a lot of home buyers in Houston pause. When interest rates climb upward, it’s only natural for buyers to start considering ways to make home ownership more affordable. One method is the 2–1 buydown, which allows borrowers to pay more upfront while enjoying reduced interest rates for the first two years of their mortgage.

A 2–1 buydown is a great option for a lot of Houston home buyers to save money. Is it an option you should consider? Let’s discuss some of the advantages of a 2–1 buydown in Houston.

What Is a 2/1 Buydown?

A 2–1 buydown is a mortgage loan available with interest rate reductions during the first two years. “2–1” refers to points that you ‘buy down’ a loan. Basically, it means you are paying the lender more money upfront, so you owe less as time goes on. This causes your interest rate to drop by two percent in the first year, one percent in the second year, and return to the full interest rate by the third year.

The funds for a 2–1 buydown are collected during closing and placed in an escrow account. Escrow is a common legal arrangement in Houston and elsewhere where a third party holds money until a particular condition is met.

Why You Should Consider a 2–1 Buydown 

The major advantage of a 2–1 buydown is saving on monthly payments, but there are other advantages to a 2/1 buydown deal in Houston, as well.

Advantage 1: Ease into Homeownership
Many people aren’t acclimated to the responsibilities of homeownership, so a smaller monthly price may offer some relief. You never know what might need to be replaced or repaired in Year One of homeownership!

Advantage 2: Saving Money
In addition to lower monthly payments, there is also the added benefit of having more disposable income each month. This could be used to pay down the principal, finance home improvements, or help achieve other financial goals.

Advantage 3: Affording a Larger Mortgage
With temporarily lower monthly payments, you may be able to afford a larger mortgage. That means you can buy a more expensive home.

How to Get a 2–1 Buydown in Houston

Before considering a 2–1 buydown on a home mortgage in Houston, you should speak to a real estate professional about your options. A 2–1 buydown doesn’t make sense in every case, and its utility often depends on the homes you’re considering and the mortgage you qualify for. 

At Angel Fultz Realty, our Houston real estate experts can talk you through your housing options across the city. There may be better deals out there that fit your needs without requiring a 2–1 buydown. However, as long as interest rates remain high, it’s an option you should keep in your back pocket if you want to buy a home. We can connect you with trusted local lenders willing to offer 2–1 buydowns.

If you have questions about 2–1 buydowns or the real estate market in Houston, don’t hesitate to contact us today! We’re standing by to answer all of your Houston real estate questions.