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. The cost can often be covered through seller concessions.
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.
Common question
What is a 2-1 buydown?
A 2-1 buydown lowers your rate by 2% in year one and 1% in year two, then the rate goes to the permanent note rate. The cost is usually paid upfront at closing, often by the seller.
Is a buydown the same as buying discount points?
No. A buydown temporarily reduces your rate for the first years. Discount points permanently lower your rate for the life of the loan.
Related Mortgage Terms
Curious whether a buydown could lower your early payments? We can run the numbers and show you if it makes sense.
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