2% Interest Rate On Your Mortgage

There is a new loan program in development that focuses on rapid equity growth, as opposed to low monthly payments for 30 years.  The program being developed uses the funds that would normally have been been used for a 3% or 5% down payment, to instead be used to buy down the interest rate on a 15 year mortgage.  In today's market, this strategy could get the rate down to 2%.  The crafters of this mortgage suggest a 100% LTV program that relies on the buy down investment and rapid equity growth as major incentives to keep borrowers paying as agreed.

This program could be of significant interest to millennial with dual incomes and minimal personal debt.  The payment would only be slightly higher than a 30 year fixed rate payment due to the low bought down interest rate.  A significantly shortened payment schedule and rapid equity growth speaks to the millennial affection for mobility, by assuring the quick marketability of a home with equity.

There are some regulatory hurdles…mainly the QM question regarding total allowable closing costs.  A re-definition of interest rate buy down points so as not to be included in QM calculation would go a long way in gaining secondary market interest in this product.