Mortgage Buydown

A buydown lowers your interest rate by paying some interest upfront. It can make the first years of homeownership easier, and sellers or builders often cover the cost.

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What is a Mortgage Buydown?

There are two kinds of buydowns. A temporary buydown, such as a 2-1 buydown, reduces your rate by 2% in year one and 1% in year two before settling at the note rate. A permanent buydown uses discount points to lower the rate for the life of the loan.

Lower early payments

Reduce your payment in the first years.

Seller-paid options

Sellers and builders can fund the buydown.

Permanent or temporary

Choose discount points or a 2-1 / 1-0 structure.

Refinance friendly

Keep your options open if rates fall.

Is a Mortgage Buydown right for you?

Who it is for

Buyers who want a lower payment in the first years
Buyers negotiating seller credits
Borrowers who expect income to grow

Benefits

Lower early payments
Sellers or builders can pay for it
Permanent buydowns lower the rate for the life of the loan

Things to consider

Costs money upfront
Temporary buydowns end, and the payment rises
You must qualify at the full note rate

Everything about the Mortgage Buydown

Choose a topic to jump to the details.

How a 2-1 buydown works Discount points Negotiating seller credits Temporary vs. permanent buydowns Finding the break-even point Mortgage Buydown FAQs

How a 2-1 buydown works

The funds for the reduced payments are held in an account and applied each month. In year three the rate reaches the full note rate and stays there for the rest of the loan.

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Discount points

One point equals 1% of your loan amount and typically lowers your rate by a fraction of a percent. Whether it pays off depends on how long you keep the loan.

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Negotiating seller credits

In a slower market, asking the seller to fund a buydown can be worth more to you than a price reduction. We can show the numbers both ways.

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Temporary vs. permanent buydowns

2-1 buydown: the rate is 2% lower in year one and 1% lower in year two, then returns to the note rate
1-0 buydown: the rate is 1% lower in year one only
Permanent buydown: you pay discount points to reduce the rate for the life of the loan

Temporary buydowns are funded by a subsidy account held by the lender, often paid by the seller as a concession.

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Finding the break-even point

For discount points, divide the cost of the points by the monthly savings. If you will keep the loan longer than that number of months, points can pay off.

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How to apply

1
Request a call back
Tell us about your goals. A loan officer will confirm whether this program is the right fit.
2
We prepare the application
We fill out the application with you and send a secure list of documents to upload.
3
Approval and closing
We handle appraisal, underwriting and title, keeping you updated by phone, text or email.

Documents to have ready

Standard income, asset and credit documents for the loan program you choose
Purchase contract showing any seller-paid buydown

Every file is different. Your loan officer will send an exact list.