Buydown to Lower Your Mortgage Rate in Nashville

A buydown lowers your mortgage rate by paying money up front. You or the seller pay points at closing to get a lower monthly payment. This can help when you are buying a home in Nashville or nearby towns like Mt. Juliet or Murfreesboro.

What is a buydown?

A buydown is a prepaid fee to the lender that reduces your interest rate. Each point usually costs 1% of the loan amount. Lenders typically drop the rate by about 0.25% per point, though numbers can vary.

Buydowns can be permanent or temporary. Permanent buydowns lower the rate for the life of the loan. Temporary buydowns cut the rate for a few years only. Builders in Spring Hill or sellers in Brentwood sometimes offer temporary buydowns to make a sale more attractive.

How 3-2-1 and 2-1 buydowns work

A 3-2-1 buydown reduces the rate more in the first year, then steps up. For example, the first year might be 0.75% lower, the second year 0.5% lower, and the third year 0.25% lower. By year four the rate returns to the loan note rate.

A 2-1 buydown follows the same idea with smaller steps. These options give monthly relief early on. That helps buyers manage moving costs or repairs in the first years living in a new home in Franklin or Nolensville.

When it makes sense to buy points

Buy points if you plan to stay in the home beyond the breakeven point. To find breakeven, divide the cost of the points by your monthly savings. If the result is shorter than how long you will keep the mortgage, points can save money over time.

If you must choose between a bigger down payment and buying points, the larger down payment usually wins. It lowers your monthly payment and can improve loan options. Also think about resale plans, job moves, and local market trends in Hendersonville or Gallatin.

Who pays and what to watch for

The buyer pays points most of the time, but sellers and builders can pay them as part of credits. Lenders may allow the credit to be applied to a buydown rather than closing costs. Make sure the contract spells out who pays and how long the buydown lasts.

Watch for situations where buydowns are not allowed, such as certain investment property loans or some cash-out refinances. Always ask your lender for exact numbers and scenarios so you know the real cost and savings.

If you want a quick run through of how a buydown would affect a loan in Nashville or the surrounding suburbs, call or text me. I have helped nearly 3,000 families and can run numbers for Brentwood, Franklin, Smyrna, or wherever you are looking. Reach me at 615-955-0461 or visit keithgo.com. NMLS 488023, Barrett Financial Group, NMLS 181106.

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