How a 2-1 Buydown Actually Works

A 2-1 buydown temporarily lowers your mortgage rate by 2% in year one and 1% in year two, then settles into your permanent note rate in year three, giving you two years of a smaller payment right when moving costs and new-home expenses hit hardest.

How the math plays out

On a loan with a 7% note rate, a 2-1 buydown means you'd pay roughly 5% in year one, 6% in year two, and the full 7% from year three onward. The difference between the buydown rate and the real rate is funded upfront, often by the seller or builder as a credit.

Who typically pays for it

• Sellers, as a negotiating tool to make their listing more attractive without dropping the price

• Builders, as an incentive on new construction

• Buyers themselves, in some cases, if they expect income to rise or plan to refinance before year three anyway

Why this differs from a permanent rate buydown

A permanent buydown (paying points) lowers your rate for the life of the loan. A 2-1 buydown is temporary and cheaper upfront, useful specifically as a bridge while you settle in or wait for rates to potentially improve enough to refinance.

FAQ

What happens if I refinance before the buydown ends? You simply move to your new refinanced rate, you don't lose anything, the buydown period just ends early.

Can I ask a seller to pay for a 2-1 buydown? Yes, it's a common and often effective negotiating request, especially in a slower market.

Want to see if a seller or builder credit could fund one of these for you? Book a call. Expect to close one week early.