Mortgage Glossary
Buydown
Defined by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
A buydown is paying money upfront to lower a mortgage's interest rate, either permanently with discount points or temporarily for the first few years.
What Buydown means
A permanent buydown trades points for a lower rate over the full term. A temporary buydown, like a 2-1, reduces the rate by two points in year one and one in year two before settling at the note rate.
Florida example
Florida builders frequently offer a 2-1 buydown as an incentive: on a 6.75% loan, you'd pay as if the rate were 4.75% in year one and 5.75% in year two. The builder funds an escrow that covers the difference.
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