Cynthia Cohn & Associates, Inc. Real Estate Brokerage, Pasadena.

Blog

How A 2-1 Mortgage Buydown Works
As of November 2022, interest rates are hovering around 6.8% in the United States. That’s up from just above 3.2% in January 2022. While the Federal Reserve is working on cooling inflation, the housing market is working hard to adjust to rates and still provide the American dream of home ownership. If you’re in the market for a new home, interest rates on new 30-year mortgages may seem daunting. There’s another option available to qualified buyers, and that’s a 2-1 buydown. What’s a mortgage buydown? Let’s break it down: A 2-1 buydown is a specific kind of financing. Mortgage rates are determined by the lender, not the federal government. But they are influenced by market trends, regardless of sector. Because of rising interest rates, home builders and lenders concerned with closing mortgages amid rate hikes have leverage to offer a buydown, which gives new buyers a lower rate for two years. Buydowns are temporary, but impactful. Typically buydowns are tiered between one to two years. In the first year, it’s typical to see a mortgage at two full percentage points less than the market rate. In the second year, mortgages are 1% less than the market rate. The expectation is that after two years, buyers will go back to the “normal” rate. This results in a mortgage payment adjustment, so buyers should budget for, and be aware, that their mortgage payment will likely increase. It’s a good negotiation point when buying/selling. Gone are the days of asking home builders and sellers to pay closing costs. The market is simply too competitive. But since the market has cooled, sellers and home builders realize that they need some incentive to attract buyers. If you’re looking for a negotiation lever to pull, asking for the seller to provide a buydown may be key. Here’s an example of a 2-1 buydown from our friend Floyd Walters at BWA Mortgage. This instance is if the current 30 year mortgage rate is 6.5%. On a 2-1 buydown you would pay the following rate: 4.5% for the first year 5.5% for the second year 6.5% for the remaining years of the loan There are lots of variations of the product but in its simplest form, a seller would pay the one-time fee of 2.38% of the loan amount to buy down the rate. Here’s how that might look on a $1,000,000 purchase with a buyer putting 20% down and needing to borrow $800,000. $800,000 loan amount x the 2.38% buydown cost = $19,040. So for a seller, that’s equivalent to accepting a $980,960 sales price, so a 2% reduction in asking price. Working with a knowledgeable agent is the key to not only finding the right home but finding the best deal that aligns with your finances. If you have questions about what a buydown could mean when purchasing your next home, let’s chat. Our team would love to work with you. Call us today! 626-714-6808
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Reviews

2355 Brigden Road | The Mann Family (Sellers, September, 2021)
We met Cynthia while touring one of her open houses and were impressed with her professionalism and how she managed that listing. When we decided to sell our home, we interviewed her along with a couple other realtors we met previously. Cynthia’s knowledge of the real estate market convinced us to trust her and her team with our listing. Her checklist process, a standardized list and timeline to preparing, staging, showing, and selling our home, really helped us through the transaction. Cynthia’s suggestions and recommendations were excellent and timely. Her staff, including stager, photographer, and videographer were all talented, professional, and prompt. We received many offers and Cynthia helped us review all the various offers and select the offer that best suited us. Even after closing, she continued to support us with communications to the new owners for small issues like packages mistakenly sent to our “old” address. We fully recommend Cynthia Cohn & Associates as a listing agent. Her professionalism, expertise, and support are excellent.
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Charitable Giving

Women Networking For Women Raises $27,955
Through Women Networking For Women, a group I co-founded, we raised $27,955 for Door of Hope at our October fundraiser. Over 100 Pasadena professionals came together to network and raise funds. It was so great to see everyone! Thank you to our sponsors, attendees, event coordinators, and behind the scenes team for making this such a success. Here's a quick snapshot of the event. $27,955 total money raised 115 tickets purchased 1 Platinum Sponsor $5,000 1 Gold Sponsor $2,500 9 Silver Sponsors $1,000 8 Bronze Sponsors $500 16 Friend Sponsors $250 Our goal was to raise $31,000 to help Door Of Hope make furniture and painting improvements to their living spaces. We are a tad short, but there's still time to donate to this cause to meet our goal! In the notes when you checkout, please put "Women Networking For Women." Supporting local organizations and other women brings me so much joy. I truly believe Winston Churchill got it right: “We make a living by what we get. We make a life by what we give.”
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In Escrow

850 East Ladera Street, Pasadena

$948,000
3 BEDS / 2 BATHS

Video

In Escrow I Multiple Offers

Active

2005 New York Drive, Altadena

$1,250,000
3 BEDS / 2 BATHS

Video

Open I Thursday 11 am - 2 pm I Sat & Sun 2-4 pm

Active

601 West Montana Street, Pasadena

$1,110,000
3 BEDS / 2 BATHS

Virtual Tour

Call for an appointment

Sold

1144 Tierra Alta Drive, Pasadena

$1,425,000
3 BEDS / 2 BATHS

Video

Multiple Offers I $145K Over Asking

Closed

2207 Pinecrest Drive, Altadena

$1,895,000
4 BEDS / 3 BATHS

Video

Multiple Offers I $305K Over Asking

In Escrow

593 North Garfield Avenue, 4, Pasadena

$769,000
3 BEDS / 2 BATHS

In Escrow

Closed

2125 Oakdale Street, Pasadena

$1,440,000
3 BEDS / 1 BATHS

Video

Multiple Offers

Sold

1023 Calle de las Estrellas #3

$406,000
2 BEDS / 1 BATHS

Represented the Buyer

Sold

497 South El Molino Avenue, 305, Pasadena

$499,000
2 BEDS / 2 BATHS

$51K Over Asking I Multiple Offers

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