There are two common mortgage buydowns: temporary buydowns and permanent buydowns. Temporary buydowns offer a lower interest rate for a set period, after which the interest rate adjusts to the note rate. Permanent buydowns, such as discount points, offer a lower interest rate for the life of the loan.
A lower interest rate with a temporary buydown can mean a more affordable initial monthly mortgage payment while you get settled in your new home. Temporary buydowns offer a reduced rate on a home loan for one, two or three years in exchange for a cash deposit from a builder, lender or seller.*
Mortgages with buydown plans have lower initial payments, a temporarily reduced interest rate and no balloon payments at the end of your loan term. In addition, the structure of the buydown will determine your payment increases, making them predictable throughout the life of your loan. We offer these options to help you get settled at the start of your loan.
- A 1-year buydown brings your rate down for the first year. Also known as a 1-0 buydown because your interest rate is reduced by 1 percent for the first year of your mortgage and then returns to the original rate.
- A 2-year buydown brings your rate down for the first two years. 2-1 buydowns reduce your interest rate by 2 percent for the first year and 1 percent for the second year. In year three, the interest rate returns to the original rate for the remaining mortgage term.
- A 3-year buydown brings your rate down for the first three years. A 3-2-1 buydown reduces your interest rate by 3 percent for the first year, 2 percent for the second year and 1 percent for the third year. In year four, the interest rate returns to the original rate for the remaining mortgage term.
Payment Advantage: Reduce your rate by 1 percent for the first year on us. Our Payment Advantage program allows you to lock in a Conventional loan, and we’ll pay 1 percent of your interest rate for one year with a lender-paid temporary buydown. After the first year, you’ll have a predictable payment increase and may be eligible to refinance through programs such as the Payment Protection program, which has no lender fees. For Payment Protection program full terms and conditions, visit www.guildmortgage.com/homebuyer-protection. Conventional financing options for first-time and repeat buyers include primary purchase transactions with as little as 3 percent down and credit scores as low as 620.
Payment Advantage Plus: With Payment Advantage Plus, a 2-for-1 buydown program, eligible homebuyers can save even more. Payment Advantage Plus lowers your monthly payment for the first two years. When using a seller credit, your interest rate is 2 percent lower for the first year. Then we’ll pay to lower the interest rate by 1 percent for the second year.
With our Payment Advantage programs, qualified borrowers can save even more by refinancing later with our Payment Protection program.
Discount points are optional one-time fees paid at closing in exchange for a lower interest rate. Also known as mortgage points, the more points paid, the lower the mortgage interest rate. Each discount point is equal to 1 percent of your total loan amount. You can typically pay up to three points, depending on how much you want to lower your rates. Because they don’t expire and permanently reduce your interest rate, they’re known as a permanent buydown.
How do you decide whether or not to pay points, and how many? That depends on several factors, such as how much money you have for a down payment and how long you plan to stay in your home. Points reduce the interest rate, an advantage if you plan to stay in your home for a while. But if you need the lowest possible closing costs, you can consider choosing your loan program’s lowest possible point option.