Mortgage rate buydowns: how to pay less interest upfront.
A rate buydown lets you (or a seller, or a builder) pay upfront to lower your mortgage interest rate - either temporarily for the first year or two, or permanently for the life of the loan.
- Temporary buydowns ease you into full payments
- Permanent buydowns lower your rate for good
- Often negotiated as part of a purchase
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Two kinds of buydowns
"Buying down" your rate means paying money upfront (often called discount points) to reduce your interest rate. How long that reduction lasts depends on which type of buydown you use.
Permanent Buydown
Pay points at closing to permanently lower your interest rate for the life of the loan - makes sense if you plan to stay put for a while.
Temporary Buydown (2-1, 3-2-1)
Your rate starts lower and steps up over the first 1-3 years until it reaches the full note rate - eases you into the full payment.
Who Pays
Buydowns are often paid by the buyer, but sellers and builders frequently offer to fund them as a purchase incentive.
When a buydown is worth it
Seller-paid buydown
If a seller or builder is offering to fund the buydown, it's close to free money - almost always worth taking.
Long-term ownership
Paying for a permanent buydown yourself makes more sense the longer you plan to keep the loan - the upfront cost needs time to pay off.
Short-term ownership or refinancing plans
If you expect to sell or refinance in a couple of years, a self-funded permanent buydown may not pay for itself.
Not sure if a buydown makes sense for you?
Buydown FAQs
What's a 2-1 buydown?+
Your rate is 2% below the note rate in year one, 1% below in year two, then jumps to the full note rate in year three and beyond.
Can a seller pay for my buydown?+
Yes - seller-funded buydowns are common, especially in slower markets where sellers want to make their listing more attractive.
Is a permanent buydown the same as paying discount points?+
Yes - a permanent buydown is typically achieved by paying discount points at closing to lower your rate for the life of the loan.
Related guides
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