Rate Buydowns

Lower Your Rate Without Waiting for the Market.
Make the Seller Pay for It.

A buydown drops your interest rate and your payment for the first 1-3 years. The cost can come from the seller, the builder, or your DPA program. Run the numbers below.

What Is a Buydown?

Money paid upfront to reduce your rate temporarily or permanently. The difference is held in escrow and applied to your monthly payment. You pay less now. The rate steps up later.

Most Popular

2-1 Buydown

Year 1: Rate is 2% below note rate.
Year 2: 1% below.
Year 3+: Full rate.

6.5% note rate = you pay 4.5% in Year 1, 5.5% in Year 2. On a $340K loan that saves ~$430/month in Year 1.

3-2-1 Buydown

Year 1: 3% below.
Year 2: 2% below.
Year 3: 1% below.
Year 4+: Full rate.

Maximum Year 1 savings. Costs more upfront. Three full years of reduced payments.

1-0 Buydown

Year 1: 1% below.
Year 2+: Full rate.

Simplest. Cheapest. One year of savings. Good if you expect income to grow or plan to refi within 12 months.

Permanent Buydown (Points)

Pay upfront to lower the rate for 30 years. 1 point = 1% of loan amount. Typically reduces rate by ~0.25%. Unlike temporary buydowns, this lasts the life of the loan. Makes sense if you keep the home 5+ years.

For Realtors: Why This Changes Negotiations

Instead of asking the seller to drop the price $15,000 — which barely moves the payment — ask for a 2-1 buydown concession. Same $15,000 gives the buyer $400+/month in savings for 2 years. That turns "we can't afford it" into "let's write the offer." Full Realtors page →

For Buyers: Who Pays?

You don't pay for it. The cost comes from the seller (concession), the builder (new construction incentive), your employer (relocation), or certain DPA programs with a built-in 2-1 buydown option. Ask me which fits your deal.

Buydown Calculator

See what a buydown saves you — month by month, year by year.

Real Scenarios

First-Time Buyer — Seller 2-1

$350K purchase. 6.5% rate. Seller puts $12K toward a 2-1 buydown instead of cutting price. Year 1: $430/mo savings. Year 2: $220/mo savings. Total: ~$7,800 in reduced payments over 2 years. Buyer qualifies at full rate but gets breathing room while income grows.

New Construction — Builder 3-2-1

Builder offering $20K in incentives. Buyer takes a 3-2-1 buydown instead of upgrades. Year 1: $630/mo savings. Year 2: $430/mo. Year 3: $220/mo. If rates drop, buyer refis and unused buydown funds are returned.

Investor — Permanent Points

$400K property at 7.25%. Pays 2 points ($8K) to buy down to 6.75%. Saves $135/mo. Breakeven: 59 months. Keeping 10+ years = $8,200 net savings over loan life. Smart for buy-and-hold.

Questions I Hear Every Week

Does a buydown help me qualify for more?
Temporary buydowns (2-1, 3-2-1, 1-0): no — you qualify at the full note rate. The buydown lowers payments, not qualification. Permanent buydowns (points): yes — you qualify at the bought-down rate, which can increase your purchasing power.
What if I refinance during the buydown?
Unused funds in the buydown escrow are typically returned. If rates drop in Year 1 of a 2-1 and you refi, you get Year 2 funds back. You win either way — lower payment now or lower rate through refi later.
Is a buydown better than a price reduction?
For monthly cash flow — almost always yes. $15K price reduction on a $350K home at 6.5% saves ~$100/month. Same $15K as a 2-1 buydown saves $430/month in Year 1. The price cut saves more over 30 years, but the buydown puts more cash in your pocket right now.
Can I combine a buydown with DPA?
Yes. Some DPA programs include a 2-1 buydown option built in. And you can use seller concessions for a buydown on top of DPA covering your down payment. Stack them. See FHA + DPA page →
How much does a 2-1 buydown cost?
Roughly the total payment differences over the buydown period. On a $340K loan at 6.5%, a 2-1 costs about $10,000-12,000. The seller, builder, or employer pays — not the buyer in most deals.

Want to See if a Buydown Fits Your Deal?

Call me with the numbers. Five minutes. I'll show you what it costs and what it saves.

☎ Call 832-701-8144Book a Strategy Session