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Finance Articles
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Real Estate Finance Strategy that Few People Consider
By Mark Barnes
If you are considering a new home loan anytime soon, and you do not want to get an adjustable rate mortgage (remember, ARMs are very strong loans), you should consider a 2/1 buydown. This is a great mortgage program for people who require a smaller payment now, knowing that they will have more money in the following years. Here`s how it works. You pay an additional premium on your loan amount to get a 2 percent improvement on the rate. So, if the 30-year fixed rate mortgage is 6 percent, you will get a rate of 4 percent in the first year of your loan. In the second year, your rate will go up one percent to 5 percent, and in the third year, your rate will increase to the rate it was when you locked in your loan, the 6 percent in this example. Then, it will remain fixed at that rate, until you pay it off, sell or refinance. For people afraid of adjustable rate mortgages, this is a very powerful loan. It`s also great for people buying their first home or for newlyweds, who think they have to rent, before buying. Remember, there are many ways to get into a home. This program is one of them. 
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