Assumable Mortgages vs 2-1 Buydowns: Save on Home Loans

When people talk about buying a home right now, the conversation almost always circles back to one thing: interest rates. And sure, rates are higher than what we saw in 2020 during the COVID market, but here’s the truth—they’re not crazy compared to history. The bigger issue today isn’t just rates—it’s the cost of living, rising property taxes, and skyrocketing insurance. These are the silent debt-to-income (DTI) killers that aren’t getting enough attention.

Still, buyers and sellers are finding creative ways to make deals happen in this market.

Two of the hottest strategies right now are 2-1 buydowns and assumable mortgages. Let’s break them down.

The 2-1 Buydown: Short-Term Relief

A 2-1 buydown is a seller or builder incentive that temporarily lowers your interest rate for the first two years of your mortgage.

📊 Here’s an example:

• Home Price: $350,000

• Loan Amount: $325,000

• At 7% interest: $2,163/month P&I

With a 2-1 buydown:

• Year 1: Rate drops to 5% → $1,744/month

• Year 2: Rate at 6% → $1,949/month

• Year 3+: Back to the full $2,163/month

That’s about $7,500 saved in the first two years.

The catch? Once the buydown ends, you’re right back at the full payment unless you refinance. Builders often use this tool to squeeze buyers into homes who might not be ready for the higher payment long-term.

Assumable Mortgages: The Long-Term Game Changer

Now let’s talk about assumable mortgages—the hidden gem in today’s housing market.

If a seller has an FHA or VA loan, you may be able to assume their loan—same balance, same interest rate, same terms.

📊 Example:

• Home Price: $350,000

• Seller’s Loan Balance: $250,000 at 3%

• Payment: $1,054/month P&I

Compare that to the same loan balance at 7%: $1,663/month. That’s a $609 monthly savings—or more than $36,000 over five years.

Of course, you’ll need to cover the gap between the seller’s loan balance and the purchase price ($100,000 in this example). That can be cash or a second mortgage. But even then, total payments often come out cheaper than taking out a brand-new loan at today’s higher rates.

This is why assumable loans aren’t just appealing to first-time buyers—they’re also a hot play for investors chasing better cash flow on rentals.

The Silent DTI Killer: Taxes & Insurance

Now here’s where the real danger comes in. Even with a buydown or an assumable loan, property taxes and insurance can blow up your budget.

Imagine this:

• You budget for $200/month in insurance.

• The actual quote comes back at $700/month.

That’s a $500 difference, and suddenly your $1,900 projected payment turns into $2,400. Your debt-to-income ratio spikes, and in some cases—you no longer qualify.

Property taxes add even more weight. In Texas, the average tax bill in Austin can be almost $8,000 a year, Dallas closer to $5,000, and Houston around $3,500. That’s hundreds of dollars added to your monthly mortgage payment.

The Bottom Line

• 2-1 Buydown: Good short-term relief, but only a temporary fix.

• Assumable Mortgage: Long-term savings, sometimes tens of thousands of dollars.

• Taxes & Insurance: The silent killers—don’t ignore them when running your numbers.

If you’re in the market right now, don’t just ask, “What’s the rate?” Ask, “What’s my full payment—principal, interest, taxes, and insurance?” That’s the number that matters.

At Pointers Financial Services, we help buyers and investors look at the whole picture so they don’t get blindsided.

📞 Call us at 512-900-5737 or visit www.pointersfinance.com to get your custom mortgage breakdown today.