The Marquee Loop: 3 2 1 buydowns

3/2/1 buydowns are a type of mortgage financing option in which the borrower pays an upfront fee to lower their interest rate and mortgage payments for the first few years of the loan. Here’s how it works:

• With a 3/2/1 buydown, the borrower pays an upfront fee to the lender equal to 3% of the loan amount.
• In the first year of the loan, the interest rate is reduced by 3% (compared to what it would have been without the buydown), resulting in lower monthly mortgage payments for the borrower.
• In the second year of the loan, the interest rate is reduced by 2%, resulting in slightly higher monthly mortgage payments than in the first year but still lower than they would have been without the buydown.
• In the third year of the loan, the interest rate is reduced by 1%, resulting in slightly higher monthly mortgage payments than in the second year but still lower than they would have been without the buydown.
• After the third year, the interest rate and monthly payments revert to what they would have been without the buydown.

3/2/1 buydowns can be beneficial for borrowers who want lower initial monthly payments or who expect their income to increase in the future. However, it’s important to consider the upfront cost of the buydown and whether the potential savings are worth it in the long run.