What is a rate buydown?
Answered by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
A rate buydown uses an upfront payment to lower your interest rate, either permanently (discount points) or temporarily (a 2-1 or 3-2-1 buydown that steps up over the first years). The seller or builder often funds temporary buydowns.
It reduces your payment, with permanent buydowns helping long-term and temporary ones easing the early years. We'll show which buydown saves you the most for how long you'll stay.
Lowering your rate
A rate buydown means paying to reduce your interest rate. There are two kinds: a permanent buydown using discount points, and a temporary buydown that lowers the rate for the first year or two.
Both aim to shrink your monthly payment, just over different time frames.
Which type fits
A permanent buydown suits buyers staying long term. A temporary buydown, often seller-funded, helps with early payments in a high-rate market.
The right choice depends on how long you will keep the loan. Reach out and we will compare both for your situation.