What is a Buydown Mortgage?

by Clyde Brown, Fremont Real Estate Expert

In simple terms a buydown mortgage is a lump sum payment which is made with the initial purchase of a home. It essentially involves making a prepayment on interest. This reduces the interest rate that the lender has to pay on the mortgage loan. Buydown mortgages are available in two different types, and you may want to consider either of these when you are purchasing a new home in Fremont.

Temporary buydown mortgage

A temporary buydown mortgage will reduce the interest rate for the first few years of the mortgage. A 3-2-1 option is a typical buydown, which means that the person borrowing the money will pay 3% below the full interest rate during the first year, 2% in the second and one percent in the third. In the fourth year the borrower must pay the full interest rate. Many homebuyers in the Fremont area are choosing this type of mortgage as a way to lower their payments.

Permanent buydown mortgage

The permanent buydown mortgage will reduce interest rates for the entire term of the mortgage. This type of buydown mortgage will lower the interest rate for the rest of the term of the loan. This type of mortgage involves a larger lump sum payment, which can be financed if need be. There are many banks in Fremont that recommend this type of loan as a solution to high interest rates, especially when the rates appear to be rising.

Buydown mortgages can help reduce the costs of the monthly payments and is good for people that do not qualify for other low payment loans. They are also good for individuals in Fremont that need to make the house more affordable on a short-term basis because they expect their future income to be higher.

There is a lot of free information available to you about buying, selling, investing, or relocating in the Fremont real estate market. For complete information about the Fremont Ca real estate market including current Fremont homes for sale, property values, market conditions and more please visit the most complete website dedicated to everything Fremont real estate related. www.ClydeBrownHomes.com.

If you or someone you know are in need of a competent and experienced Fremont real estate agent in or near Fremont Ca, or have real estate or mortgage related questions, please feel free to contact me I will be more than glad to answer your questions. Call me at 800-839-0665 or email me at Clyde@ClydeBrownHomes.com. Clyde Brown Legacy Real Estate & Associates.

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