Rate Buydowns: what are they, how do they work, and most importantly, how can they help you save money? Check out these Rate Buydown Q&A’s, and reach out to a Covington Homes Community Sales Manager for more details!

1. What is a mortgage temporary rate buydown?

a. This program provides home buyers a lower rate on a mortgage from one to three years allowing you to ease into the payment of your new home.

2. How does it work?

a. You are able to buy down the rate (consult with your lender for costs associated with the buydown) so that your initial interest rate is lower. This gives you the opportunity to lower your monthly mortgage payment for the first, second and or third year, before settling in to the current market rate. If interest rates go down during this time, then you can refinance into a fixed lower rate.

3. Types of mortgage rate buydowns:

a. There are several buy down programs available. 2-1 buy downs are most popular (lower rate for the first 2 years), however there are 3-2-1 buy downs as well (lower rate for the first 3 years). For example, if you choose a 2-1 buydown at a current market rate of 6.5%, then your first year rate would be 4.5% , 5.5% on the second year and 6.5% in the 3rd year and going forward.

4. What are the advantages of a buydown?

a. Lower initial mortgage rate

b. Lower monthly payments – ease into the payments of your new home

c. Save money for other items

d. Pay less interest over the life of your loan due to initial savings

e. You may be able to qualify for more!

5. Should I buydown my mortgage rate? / When should I buydown my mortgage rate?

a. Consider a temporary buydown rate if you would like smaller payments in the early years of your home loan.

b. A temporary buydown mortgage will allow you to save money in the initial years of your mortgage, freeing up money for other items.

6. How to find out more information

a. Contact a Covington Homes Sales Manager at 719-448-5000 to discuss options, programs and offers presented by our preferred lenders (list lenders here, or include their logos on graphic for social).