If you’re worried about high interest rates making homeownership less affordable, you’re not alone. At Ross Mortgage Corporation, we have over 75 years of lending experience and we offer a solution to ease your concerns: the Ross Rate Reducer, commonly called a one-year buydown. This option prepays your interest which in return temporarily lowers your interest rate, making your first year of monthly payments more affordable.

And there’s more good news! Ross Mortgage acknowledges that inflation has put a burden on your monthly bills and will pay the upfront interest on this loan program. We will credit the buydown interest at closing, alleviating any additional cost to you! 

What Is a One-Year Buydown?

A one-year buydown lowers your interest rate for the first 12 months, reducing your monthly mortgage payments. After the first year, your rate returns to the original locked-in rate. For example, if your standard rate is 6.5%, a one-year buydown could lower it to 5.5% in the first year, giving you time to adjust financially while settling into your new home.

Why a One-Year Buydown Makes Sense Now

Here’s why this option is so attractive in today’s market:

1. Lower Payments Now: With rates higher than they’ve been in recent years, a one-year buydown can make your home more affordable in the short term.
2. Room to Refinance: Many experts expect interest rates to drop soon. With a one-year buydown, you may be able to refinance into a lower rate before your mortgage returns to the higher rate.
3. Seller Assistance: In many cases, the cost of the buydown can be covered by the seller or builder, reducing your upfront expenses.

Pros and Cons of a One-Year Buydown

Here’s a quick look at the benefits and potential drawbacks:

Pros

• Lower monthly payments in the first year, giving you financial breathing room.
• Flexibility to refinance if interest rates drop as predicted.
• Often covered by the seller or builder, meaning it may not cost you extra; in this special promotion, Ross Mortgage will be crediting the cost of the buydown interest to you at closing.
• All pre-paid interest will be refunded if you refinance within the first year.

Cons

• The savings are temporary; after the first year, your payments will increase to the standard rate.
• No guarantee that interest rates will drop enough to make refinancing worthwhile.

Common Questions About a One-Year Buydown

How much can I save with a one-year buydown?
Your savings depend on the size of your loan and the difference in interest rates. Typically, you could save hundreds of dollars each month during the first year.

Example Scenario: 30-Year, $200,000 loan with a first-year interest rate of 5.5% and a rate after the first year of 6.5%:

• First-Year Monthly Principal & Interest Payment (at 5.5%): $1,135.58
• Principal & Interest Payments After the First Year (at 6.5%): $1,264.14
• Monthly Savings in the First Year: $128.56
• Total Savings in the First Year: $1,542.72

Can I refinance after the first year?
Yes! If interest rates drop, you can refinance before your higher rate takes effect, helping you lock in better long-term savings.

Is a one-year buydown better than other options?
A one-year buydown offers predictable savings, while options like an adjustable-rate mortgage (ARM) may fluctuate over time. It provides stability for homeowners looking for short-term affordability with a fixed-rate future.

Is a one-year buydown right for You?

If you’re eager to buy a home now but want to avoid the full impact of today’s higher interest rates, a one-year buydown might be the perfect solution. It allows you to get into your new home while enjoying lower payments upfront, giving you flexibility to refinance later if rates drop.

At Ross Mortgage, we’ve been helping homeowners for 75 years, and we’re committed to finding the right mortgage solution for you. Contact us today to see how our Ross Rate Reducer can make your dream home affordable!