What is a temporary rate buydown?
Answered by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
A temporary rate buydown lowers your interest rate for the first one, two, or three years before it rises to the full note rate. Common versions are the 2-1 and 3-2-1 buydowns, usually funded by the seller or builder.
It reduces your early payments and gives you room to refinance if rates drop. Unlike permanent points, the savings are front-loaded. We'll show whether a temporary or permanent buydown saves you more.
A short-term rate cut
A temporary rate buydown lowers your interest rate for the first year or two of the loan, then it rises to the full note rate. Common versions are the 2-1 and 1-0 buydowns.
The lower early payment eases you into homeownership when moving and setup costs are highest.
How it is funded
A lump sum, usually paid by the seller or builder, funds the buydown and sits in escrow to cover the payment gap each month. It does not change your actual loan rate.
It differs from discount points, which lower your rate permanently. Apply now and we will compare a buydown to points for you.