A rate buydown lets you — or your seller — pay upfront to reduce your mortgage rate, either temporarily or permanently. It's one of the most powerful tools in a buyer's negotiation arsenal.
Not sure which buydown makes sense for you? Take our 6-step quiz and get a personalized recommendation.
Each buydown structure serves a different purpose. The right one depends on how long you plan to stay, who's paying, and what your financial goals are.
Most Popular
2-1 Buydown
Two years of rate relief
Year 1Note Rate − 2%
Year 2Note Rate − 1%
Year 3+Full Note Rate
The 2-1 buydown is the most seller-negotiated option. The rate steps up over two years, giving buyers time to settle in and grow income before reaching their full payment. Funds are held in an escrow account and refunded if you sell or refinance before the term ends.
1-0 Buydown
One year of rate savings
Year 1Note Rate − 1%
Year 2+Full Note Rate
A 1-0 buydown costs less than a 2-1 and still gives buyers meaningful first-year savings. It's a good fit when seller concessions are limited or when the buyer expects rates to drop within a year, making a refinance likely.
Permanent Buydown
Discount points, forever
All YearsReduced Rate (permanent)
Each Point~0.125–0.25% reduction
Cost1% of loan amount
Paying discount points permanently lowers your interest rate for the life of the loan. Unlike temporary buydowns, points make sense when you plan to stay long-term and can calculate a break-even point that justifies the upfront cost.
Example
2-1 Buydown in action
Here's how a 2-1 buydown affects monthly payment and who funds the difference.
Down payment: 20% ($100,000) · Loan amount: $400,000 · Buydown funded by seller concession
Period
Effective Rate
Monthly P&I
Monthly Savings
Year 1
4.75% (−2%)
$2,086
$521/mo saved
Year 2
5.75% (−1%)
$2,334
$273/mo saved
Year 3+
6.75% (full)
$2,607
—
Total buydown cost
~$9,132 (seller-funded escrow · refundable if you refi/sell early)
Permanent Points
How to calculate your break-even
Paying discount points only makes sense if you stay in the home long enough to recoup the upfront cost. This formula tells you exactly when you break even.
The Break-Even Formula
Divide the cost of your points by the monthly savings from the lower rate. The result is the number of months until you've paid yourself back.
Points Cost÷Monthly Savings=Break-Even (months)
Example: 1 point on a $400,000 loan = $4,000 upfront cost. If the lower rate saves $100/month, break-even is 40 months (3.3 years). If you plan to stay longer than that — or refinance into a lower rate before then — you can evaluate accordingly. If rates drop and you refinance before month 40, you don't fully recoup the cost of the points.
Common Questions
Buydown FAQ
Everything you need to know before using a buydown in your purchase negotiation.
Temporary buydowns (2-1 and 1-0) are typically funded by the seller, builder, or lender as a concession. In a negotiation, you can ask the seller to cover the buydown cost instead of taking a lower purchase price — in many cases, the math favors the seller doing the buydown. Permanent discount points can be paid by either party, though buyers more often pay for them directly.
Funds from a temporary buydown are held in a dedicated escrow account. If you sell or refinance before the buydown period ends, the remaining unused funds are applied to your loan payoff or returned — they don't simply disappear. This makes temporary buydowns lower risk than paying permanent points.
Conventional, VA, and FHA loans all allow temporary buydowns (2-1 and 1-0). USDA loans generally allow them as well. Permanent discount points are also accepted across all major loan types. Buydowns must be structured properly to meet lender and investor guidelines — we handle that for you.
For conventional loans, lenders typically qualify you at the note rate (the rate after the buydown period ends), not the reduced Year 1 rate. This means a buydown doesn't make you qualify for a larger loan — it's a cash-flow tool, not a qualifying tool. However, programs vary, so we'll confirm this based on your specific loan type.
A seller concession in the form of a buydown often delivers more value than an equivalent price reduction. For example, $9,000 off the purchase price on a $500k home reduces your monthly payment by roughly $50. That same $9,000 used as a 2-1 buydown can save $500/month in Year 1. If you expect rates to drop and refinance within a few years, a buydown can be a smarter use of seller funds than a permanent price cut.
Yes. FHA and VA loans both support temporary buydowns when funded by the seller or lender as a concession. For VA loans, the buydown structure must be reviewed against VA guidelines, but 2-1 buydowns are a well-established tool. FHA loans have MIP regardless of buydown, but the reduced rate in Years 1 and 2 still lowers total cash outflow meaningfully.
Also Consider
Combine with the right loan type
Buydowns work on top of your loan program. Choose the right foundation first.