Mortgage Glossary
Temporary Buydown
Defined by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
A temporary buydown lowers the interest rate for the first one to three years of a loan using funds placed in an escrow at closing.
What Temporary Buydown means
Common structures are 2-1 and 3-2-1 buydowns, often paid by a builder or seller. The rate steps up annually to the note rate, after which payments are normal.
Florida example
A Florida builder funds a 2-1 buydown on a 6.75% loan, so the buyer pays as if the rate were 4.75% in year one and 5.75% in year two, easing into the full payment by year three.
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