Two One Buydown Mortgage Attracts Better Home Buyers and Gets More Money

by Lindsey Springsteen // 

February 20, 2023

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Lindsey Springsteen of Keller Williams, Fort Myers & the Islands and Mike Malena from Gold Star Mortgage discussed current market environments and shifts in Fort Myers home sales. 

What Are the Benefits of a Two One Buydown Mortgage for Home Sellers?

If you’re selling your home, you could consider a Two One Buydown Mortgage as an option to attract potential buyers. This type of loan enables buyers to take advantage of a lower interest rate while boosting their budget and savings. By effectively lowering the buyer’s cost of borrowing money, it accelerates the process of homeownership. As the seller, this can be extremely beneficial when it comes to closing a sale quickly.

Mike Malena explained the Two One Buydown process which offers two percentage points off for the first year and one percentage point off for second year on a mortgage. For example, with 10% down payment on a $600,000 home purchase price at 6.75% mortgage interest rate, principal and interest payments would be about $3,500 per month; however the Two One Buydown option reduces it to about $2,800 per month in first year ($700 savings) and around $3150 per month in second year.

How Does It Work?

In a Two One Buydown Mortgage, sellers would pay the points upfront in exchange for a lower interest rate for the buyers throughout the life of their loan. A point is 1 percent of the total loan amount or $1,000 for every $100,000 borrowed. In essence, sellers are using money from their own pockets to reduce buyers’ future monthly payments – thus making the house more affordable for them and increasing your chances of selling success!

Why Is This Good For Selling Your Home?

This mortgage type should be offered as a seller concession, which means the seller pays for it. They offer it as an incentive to purchase their house versus another listing that’s similar to it. It usually costs about a little over 2% of the financed amount. So again, if we go back to this scenario of the $600,000 house, $540,000 loan amount, the cost is gonna be roughly about $12,500 to the seller. Market data is telling us that the initial price reduction on a house sold today is somewhere in that three to 5% range. So even if a home price is reduced on the lower side of that, say 3%, that’s $18,000. Most sellers would rather pay $12,500 versus reducing their asking price by $18,000.

So what this really does is it makes that house more affordable and more attractive to the buyer coming in because they can have a lower rate. One of the really cool parts about this is, we all expect rates to come back down in the next year or two. So the buyer can then refinance that interest rate before year three hits and never really have to suffer the full 6.75%. Another bonus is if they refinance it before the end of the two years, they get to keep whatever portion that was unused of that seller concession for the Two One Buydown. At Gold Star Mortgage, if you refinance with us, we offer no fee refinance if you did your initial mortgage with us.

Another benefit for sellers is that this type of mortgage increases the likelihood that buyers will close on your home faster than if they chose another type of mortgage. It also reduces risk associated with financing since lenders can feel more comfortable approving loans since there will already be money invested upfront by the seller which could help secure loan approval. In turn, this can save both parties time during the negotiation process because there will already be pre-existing terms between both parties before any negotiations begin.

Final Considerations

Ultimately it is important to remember that this option should not replace all other options available to both parties but rather serve as another element within negotiations between sellers and buyers that can prove beneficial for those looking to purchase your home quickly and easily! Besides being advantageous from an economic standpoint, it could also lead to stronger relationships between both parties if done correctly – leading to smoother transactions and increased satisfaction for everyone involved!
A Two One Buydown Mortgage can be an excellent tool for home sellers who want to increase their control over the sale process and attract potential buyers with competitive offers. If you’re thinking of selling your home, then don’t hesitate to contact Lindsey Springsteen or her lending partner Mike Malena for more information about how this type of loan might benefit you. With Lindsey’s vast experience in the real estate industry, she can help you maximize the return on your investment and get the best possible price for your home.

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