Home Affordability Hack

A temporary interest rate buydown is a powerful home affordability hack, especially in high-interest environments. It allows buyers to reduce their mortgage rate for the first 1–3 years of their home loan, making monthly payments more affordable during that initial period.

What is a Temporary Buydown?

A temporary buydown is when the seller prepays part of the interest upfront in the form of seller concessions to reduce the borrower’s mortgage rate temporarily.

Common structures:

2-1 Buydown: Interest rate is 2% lower the first year, 1% lower the second year, then returns to today’s note rate in year 3.

1-1 Buydown: Interest rate is 1 % lower for the first two years

1-0 Buydown: Rate is 1% lower for the first year only.

Why Use It?

Lower Initial Payments: Gives buyers financial breathing room for the first few years.

Great for Future Refinancers: If and when interest rates drop, the buyer can refinance before the full rate kicks in.

Seller-Paid Advantage: Often negotiated as a seller concession instead of a price drop.

Example of a 2-1 Buydown:

On a $500,000 loan at a 7% fixed rate:

Year 1: Buyer pays 5% interest → ~$2,684/month

Year 2: Buyer pays 6% interest → ~$2,998/month

Year 3 onward: Full 7% interest → ~$3,326/month

The difference in interest payments during those first two years is paid upfront into a buydown escrow account. Now let’s say the seller paid for the temporary buydown and you refinance within the first year of a two year buy down, you do not lose the remaining funds, they are applied towards principal reduction at closing.

Ideal For:

VA and FHA buyers (yes, buydowns are allowed!)

First-time homebuyers looking for lower entry costs

Buyers confident in rising income or future refinancing opportunities

Contact us today for a free no obligation mortgage loan pre-approval or if you have any questions regarding the temporary buydown option.