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.
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.
Want this applied to your situation?
Understanding a term is one thing. Knowing how it affects your loan, your rate, or your closing costs is another. Kara can walk you through exactly how this applies to your file — in plain language, in 30 minutes.
Schedule a Free ConsultationNo obligation. In person, by phone, or on Zoom.
Ready to Take the Next Step?
Clear answers. No pressure. Just a solid plan built around you.
30 minutes. In person, by phone, or on Zoom. No obligation.