Why is the 2/1 buy-down the best real estate financing plan out there?

Written By Steps To Faculty Published July 12th, 2010

Real estate financing is the one of the most challenging and important things that anyone can involve him or herself with; make a bad choice, and you could pay a very hefty price, indeed. Happily, there are ways of navigating through the morass, and one simple approach – the 2/1 buy-down approach – can work miracles when it comes to constructive real estate financing that will minimize your personal risks

Step 1: Reason 1 it allows you to make a smaller payment now

Under a 2/1 buy-down model, you pay an additional premium on your loan amount to get what amounts to a 2 percent improvement on the rate; the rate will increase the second year and then ‘freeze’ at the rate it was when you ‘locked in’ your loan; at this point, it will remain fixed at that rate until you pay the loan off, sell the property, or refinance.

Step 2: Reason 2 it is better than an adjustable rate mortgage

Let’s be honest: the sheer predictability of the 2/1 buy-down model makes it better than almost anything else you will come across – and far better than any adjustable rate mortgage. Put bluntly, with so many people badly hurt by the ARM arrangements of recent years, the 2/1 buy-down is a great way to get into a home at a reasonable initial cost without the fear that you will pay down the road.

Step 3: Reason 3 It gets you into a home faster

No secrets here: when you operate through a 2/1 buy-down, you are setting yourself up to get a home of your own far earlier than would otherwise be possible. Again, you can get the home you’ve always wanted, but without the uncertainty of an ARM entering the equation.

To sum everything up, when you are looking at new home loans, you are also looking at deals that can get you in the door without placing you in jeopardy down the road; the aforementioned model can work in both regards and should be the model of choice for young couples or for young families.


Roger Due

Investing in Your Destiny® & Coaching Program - Wealth Building Summit Dallas, Texas

My name is Roger Due and I am from Albuquerque, New Mexico and I am the owner of the Monsano software company. This has been an absolutely fantastic conference. This is the best I have ever been to.