Why temporary buydowns
If your loan amount is greater than $200,000, DNJ Mortgage has the ability to use the commission the bank pays us for originating the loan to pay for the buydown cost as well as closing costs. This gives our customers a better than market interest rate at no cost to them. We can continue to refinance at no cost using a buydown program to maintain the lower than market interest rate.
Based on current market conditions we are able to offer them a no closing cost rate of 6.5% with a one year buydown. This gives them an interest rate of 5.5% for the first year and then the loan converts to a 30 yr fixed at 6.5% after the first year. By refinancing at no cost, they received an interest savings of $2500 in just one year. At the end of the year, they have three options:
Keep the loan and maintain the 6.5% interest rate.
Refinance again with no closing costs into another one year buydown.
Refinance with no closing costs into a different loan product (ARM, 15 yr fixed, etc).
As you can see, using the no closing cost loan along with a temporary buydown provides are customers with several benefits including:

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