Riding the Wave: Navigate Rising Rates With the ‘2-1 Buydown’ Strategy

By Kimberly McMahon

I am a realtor in Las Vegas with more than 20 years experience, who wants to bring you the best home buying and selling experience for you to find your dream home in beautiful Las Vegas.

How can buyers navigate this tough housing market? It’s no secret that buyers are facing a challenging housing market with increased interest rates, high prices, and reduced affordability. However, there’s a lending product known as a “2-1 buydown” that can mitigate the impact of higher interest rates. 

This loan involves an initial payment to lower mortgage interest rates for the first two years. During the initial year, the interest rate is reduced by 2%, followed by a 1% reduction in the second year, after which it returns to the normal rate. This aligns well with predictions that interest rates will decrease in the next 1 to 3 years, allowing homeowners to refinance for a permanently lower rate.

In this market, buyers can be scarce due to higher interest rates and sellers are often open to concessions, particularly when working with skilled Realtors familiar with these loan products. Sellers may cover upfront costs for the 2-1 buydown, enabling buyers to anticipate their mortgage payments for the initial years and refinance when interest rates drop.

While it’s unlikely that interest rates will reach historically low levels anytime soon, experts anticipate a decline in the coming years. Therefore, leveraging the 2-1 buydown option now positions buyers to refinance and secure lower rates before the loan’s rate expires.

For buyers struggling with affordability, this lending option presents a viable solution worth considering and negotiating. For those seeking more information or having questions about the program, call or email for assistance.