Buydown

A buydown is a financing strategy in which the interest rate is temporarily reduced for the initial years of the loan, resulting in lower monthly payments during that period.

The most common structure is a 2-1 buydown, where the rate is reduced by 2% in the first year and 1% in the second year before settling at the permanent rate in year three. The cost of the buydown is typically paid upfront at closing — often by the seller as a concession.

A buydown does not change the permanent interest rate on your loan. It is a temporary reduction designed to ease the borrower into full payments. It is different from buying discount points, which permanently lower the rate.

Why This Matters: A buydown can be a powerful tool in a high-rate environment, especially when negotiated as a seller concession. It gives you breathing room in the early years of homeownership when expenses tend to be highest.