A portion of the upfront cost is used to “buy down” the interest rate for a set number of years:
3-2-1 Buydown: 3% lower in year 1, 2% in year 2, 1% in year 3
2-1 Buydown: 2% lower in year 1, 1% in year 2
1-0 Buydown: 1% lower in year 1
After the buydown period ends, the interest rate returns to the permanent rate.
Buydown costs are often covered by:
Home sellers to attract buyers
Builders to make new construction more affordable
Lenders offering special incentives
Buyers who want lower early payments
3-2-1 Buydown
2-1 Buydown
1-0 Buydown
Permanent Rate Buydown (Discount Points)
Temporary buydowns lower payments for a few years, while a permanent buydown reduces the rate for the entire loan term.
A Buydown Loan is a mortgage option where the interest rate is temporarily reduced for the first 1–3 years. This is achieved through payments made by the seller, builder, or sometimes the borrower, which “buy down” the interest rate and reduce your monthly payment during the early years of the loan.
Common Types of Buydowns:
After the buydown period ends, the mortgage returns to its standard interest rate for the remainder of the loan.
A buydown isn’t just a temporary discount, it’s a strategic financial tool. Here’s why many of our clients find it the perfect start to homeownership:
1. Lower Payments When You Need Them Most
The early years of homeownership often come with new expenses like furniture, upgrades, and moving costs. A buydown helps reduce pressure by lowering your mortgage payments upfront, giving you breathing room as you settle in.
2. Better Cash Flow for New Homeowners
A reduced payment in the first 12–36 months helps you build savings, adjust budgets, and manage income changes confidently. It’s ideal for borrowers expecting income growth or planning future financial commitments.
3. Strong Negotiation Tool in a Slower Market
In a buyer-friendly market, sellers may be willing to fund a buydown to make the home more affordable for you, often more attractive than a simple price reduction.
4. Perfect for Buyers Expecting Future Rate Drops
If rates are projected to decline in the coming years, a buydown lets you enjoy immediate savings now, while keeping the door open for a refinance later.
A buydown may be a great fit if you:
