January 4th, 2023 5:01 PM by Regina Rickles, NMLS# 222362
What is a Temporary 2/1 Buydown
A Temporary 2/1 Buydown is an up-front interest payment that lowers the interest on a fixed-rate mortgage for the first two years of the loan term. After the 2 years are up, the interest rate reverts to the full note rate for the remaining life of the loan.
Fairway Wholesale currently only offers 2/1 Temporary Buydown funded by the seller. Which allows seller, utilizing a seller concession, to prepay some of the interest on a fixed-rate mortgage, in exchange for a temporary lower monthly payment for the borrower.
A predetermined amount is collected at closing and withdrawn each month from an account set up and maintained by Fairway for the purpose of covering the difference between the reduced payment made by the borrower and the regular payments received by the lender.
The total monthly payment received by the lender —consisting of the payment made by the borrower, plus the withdrawal from the established escrow account —is the same as it would be in the absence of the temporary buydown.