Mortgage buydowns: lower payments in the first years
In a temporary buydown, someone pays a lump sum at closing so the buyer’s interest rate is lower for the first year or two of the loan. That someone can be the seller, a builder or the lender. For sellers, offering one can bring in more buyers without cutting the price.
How a 2-1 buydown works
The rate is 2 percentage points below the loan’s note rate.
The rate is 1 percentage point below the note rate.
The rate returns to the note rate for the rest of the loan.
The lump sum covers the difference in payments for the first two years. On most loans, the buyer still has to qualify at the full note rate.
See the math: buydown calculator
Move the sliders to see what a temporary buydown does to the buyer’s monthly payment, and what it costs to fund. The cost is the same whoever pays it: seller, builder, lender or buyer.
Buyer’s monthly principal and interest, year by year
| Year | Rate paid | Monthly P&I | Saved per month | Saved that year |
|---|---|---|---|---|
| Total subsidy (the buydown cost) | $0 | |||
Illustration only. Principal and interest on a 30-year fixed loan; taxes, insurance, HOA and mortgage insurance are not included. The buyer usually qualifies at the full note rate. Actual buydown cost, eligibility and seller-contribution limits depend on the loan program; confirm with a lender. This is not a rate quote.
For sellers
- A buydown instead of a price cut. Paying for a buyer’s buydown can make your home more affordable in the first years, which may matter more to buyers than a lower price.
- It’s a seller concession. It counts toward the limit on seller contributions set by the buyer’s loan program.
- Talk it through before you counter. Keith’s team can help you weigh a buydown against a price reduction when an offer comes in.
For buyers
- What the buydown costs, and who pays it
- Whether you qualify at the full note rate
- Which loan types are eligible (often purchase loans with fixed rates)
- What happens to unused buydown funds if you refinance or sell early
Talk to a local lender
Troy Borkowski
Branch Regional Manager · NMLS #141962
American Financial Network, Inc. · NMLS #237341 · Branch NMLS #2301153
2424 Enterprise Road, Suite G, Offices #100 & 101
Clearwater, FL 33763
Ask Troy which buydown programs are available now and whether you qualify.
This page is general education, not an offer of credit or a commitment to lend. Loan programs, rates and terms are set by the lender and are subject to credit approval. TruPropIO is a real estate brokerage, not a lender. You are free to choose any lender. TruPropIO receives no fee or other compensation from American Financial Network or Troy Borkowski for referrals. Equal Housing Opportunity.