I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. Marin County jumbo buyers often ask me to run the interest-only vs. buydown comparison — here’s how the numbers actually work. Call (800) 239-1103.
Two strategies for a lower initial payment on a Marin County jumbo: the 3/2/1 buydown and interest-only. They work completely differently — here’s the side-by-side comparison for 2026.
The 3/2/1 Buydown
A 3/2/1 buydown is a temporary rate reduction for years 1–3, funded upfront by the seller. The note rate doesn’t change — a subsidy account covers the payment difference in years 1–3. After year 3, you pay the full note rate for the life of the loan.
Marin County example: $2.5M purchase, $2M jumbo at 6.875% note rate.
| Year | Effective Rate | Monthly Payment |
|---|---|---|
| Year 1 | 3.875% | ~$9,389 |
| Year 2 | 4.875% | ~$10,570 |
| Year 3 | 5.875% | ~$11,815 |
| Year 4+ | 6.875% | ~$13,119 |
Cost to fund the buydown: approximately $35,000–$42,000 from the seller’s concession budget. This amount counts toward the seller’s IPC limit.
Interest-Only Jumbo
An interest-only loan requires only interest payments for the first 5–10 years (the IO period), then converts to a fully amortizing payment. You’re not paying down principal during the IO period, but you’re keeping maximum cash in hand each month.
Same Marin County example: $2M jumbo at 7.125% IO rate (IO typically carries a slightly higher rate than amortizing).
| Period | Monthly Payment | Principal Paid |
|---|---|---|
| Years 1–10 (IO) | ~$11,875 | $0 |
| Years 11–30 (P+I) | ~$15,840 | Full amortization over 20 years |
The Key Difference
3/2/1 buydown: Starts very low, rises to market rate in year 4. Maximum short-term cash flow savings with a predictable endpoint. Seller pays the cost upfront.
Interest-only: Consistently lower for 5–10 years, then a larger payment jump at IO conversion. Longer horizon of payment relief — but you build zero equity during the IO period.
Which Is Right for Marin Jumbo Buyers in 2026?
Choose the 3/2/1 buydown if: You want maximum savings in the first 3 years, you’re confident rates will fall and you’ll refinance before year 4, and you can negotiate seller concessions because the property has been sitting or the seller is motivated. The buydown is a bet that rates drop — you capture the temporary savings and then refinance into a permanently lower rate, essentially getting the seller to subsidize your first three years for free.
Choose interest-only if: You want consistent lower payments for a longer period (5–10 years), you’re a business owner with cash flow needs who wants to deploy capital elsewhere, or you plan to sell the property before the IO period ends. IO is common among Marin executives who rotate properties or who know they’ll relocate within 7–10 years.
The hybrid that’s most common in Marin: A 7/1 or 10/1 ARM with interest-only for the first 10 years. Starting rate of approximately 6.5% IO, fixed for 10 years, with every expectation of selling or refinancing before rate adjustment. This structure provides consistent low payments across a decade-long holding horizon — which is how many Marin buyers actually think about their primary home.
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
