Temporary Buydown
A temporary buydown is a financing strategy that reduces the borrower's interest rate for the first one to three years of the loan, resulting in lower initial monthly payments.
The most common structures are a 2-1 buydown (rate reduced by 2% in year one, 1% in year two) and a 1-0 buydown (rate reduced by 1% in year one). The cost of the buydown is paid upfront at closing — often funded by the seller through concessions.
A temporary buydown is not a permanent rate reduction. After the buydown period ends, the rate returns to the original note rate for the remainder of the loan term. It is different from discount points, which permanently lower the rate. The cost is often covered through seller concessions.
Why This Matters: A temporary buydown can ease the financial transition into homeownership — especially in a higher-rate environment. When funded by the seller, it can be a powerful negotiating tool that benefits both sides of the transaction.
Common question
What is a 2-1 temporary buydown?
Your rate is reduced by 2% in year one and 1% in year two, then returns to the note rate. The cost is paid upfront at closing — often by the seller as a concession.
Is a temporary buydown the same as discount points?
No. A temporary buydown lowers your rate only for the first years. Discount points permanently lower your rate for the life of the loan.
Related Mortgage Terms
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