Mortgage Rate 'Buydowns' are back in demand but do come with some risk!

Rising interest rates are bringing back the 'temporary rate buydowns'. They offer significant, although short-term savings on mortgage rates regardless of your credit score. Borrowers get a lower rate during their loan's 1st year and it gradually increases until it resets to a 'fixed rate' in line with the market conditons at the time the loan was made. You have the '2-1' and '3-2-1'  buydowns. The 3-2-1 buydown which lowers the rate by 3% points for the 1st year, by 2% points for the 2nd year and 1% point for the 3rd year. People are hoping to be able to 'refinance' in 2 or 3 years and obtain a lower interest rate or have more income to afford the higher monthly payments but know that you are relying on the assumption that the interest rates will come down significantly over the next 2-3 years and/or your income will have increased enough to be able to afford the higher future mrtg payments. On the other hand, because mrtg rates are forecasted to continue to rise in 2023, the buydown approach can protect you against rate hikes. It's a great alternative to today's higher interest rates but does come with some risk! --> Ask the seller or builder to purchase mortgage discount points on your behalf.