The 2/1 Buydown is an awesome buying strategy to use during an inflationary economy. However, one needs to be very strategic in its' use. Like everything in life, there is a wrong and a right way of using this strategy when buying your home.
Inflation is arch enemy of mortgage interest rates and that is why buying power decreases during inflationary times as the cost of the loan is higher making the payments higher. However, since a mortgage can be refinanced, the 2/1 buydown is a great way to make payments more affordable for the first few years while waiting for inflation to improve.
Historical data tells us that when inflation improves so does the cost of goods and services, including mortgages. Therefore, once inflation does improve you can refinance to a lower interest rate, thus saving money for the entire term of the loan and not just for the first few years.
Want to learn more about the history of inflation? Here is an article from the Federal Reserve that gives a historical account of The Great Inflation that troubled the United States from 1965 to 1982.
Karen Jones, a Licensed Mortgage Loan Officer (NMLS 307015), is located in Scottsdale and has been serving Arizona with their home lending needs for over 40 years. As a Certified Mortgage Advisor, Karen is dedicated in ensuring that her clients are well educated and prepared for their new home loan decision. AmeriFirst Financial is a division of American Pacific Mortgage Corporation and her office is located in Scottsdale, Arizona.
AmeriFirst Financial is a division of American Pacific Mortgage Corporation. The views, articles, postings and other information listed on this website are personal and do not necessarily represent the opinion or the position of American Pacific Mortgage Corporation.
Karen Jones is a licensed loan originator at AmeriFirst Financial. Karen Jones complies with all regulations and rules of all government agencies and regulators including the Real Estate Settlement