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As a mortgage broker, I understand that many homeowners are seeking ways to improve their financial position—especially when interest rates remain uncertain. A new option now available which allows borrowers to structure their refinance to create more manageable monthly obligations during the early years of the loan term.

What Is a 2-1 Temporary Rate Buydown?

A 2-1 buydown is a temporary rate adjustment feature that reduces the amount of interest paid in the first two years of a new refinance loan. With this particular version, homeowners can use home equity to fund the buydown, eliminating the need for additional out-of-pocket expenses.

Here’s how it typically works:

• In Year 1, the homeowner pays interest based on a rate that is 2 percentage points below the note rate.
• In Year 2, the homeowner  pays based on a rate that is 1 percentage point below the note rate.
• From Year 3 onward, the loan returns to the original note rate for the remainder of the term.

If the homeowners  refinances or pays off the loan during the temporary buydown period, any remaining funds are applied to the principal balance of the loan—helping reduce the overall loan amount.

Who Might Benefit from This Option? This refinance structure could be worth exploring for:

• Homeowners with sufficient home equity
• Homeowners planning to refinance or sell within 2–3 years
• Homeowners  looking to improve early-term affordability
• Homeowners  who prefer a short-term payment strategy aligned with future financial plans

Because this buydown is homeowner-paid and equity-based, it provides more control to homeowners who want to customize their refinance based on their short-term goals.

Important Considerations

• Available only on certain refinance transactions
• Funded through borrower’s home equity (not cash)
• Subject to lender eligibility and program guidelines
• Not a permanent interest rate reduction

Let’s See If It’s a Fit for You

If you are  considering a refinance and has equity in your home, this option may help align the structure of the loan with your financial goals. I’m happy to provide a complimentary mortgage planning session to review your current loan and discuss if this buydown strategy makes sense for your situation.