How Do Mortgage Buy-Downs Work?

A mortgage buy-down is a way to reduce your interest rate — and lower your monthly payment — by paying money upfront at closing.

Types of Buy-Downs

• Temporary Buy-Downs (like 2-1 or 3-2-1): Start with a lower rate for the first few years before adjusting to the full rate.

• Permanent Buy-Downs: You pay points at closing to lock in a lower rate for the life of the loan.

Example: With a 2-1 buy-down, your rate might be 5% in year one, 6% in year two, and then adjust to the final rate (say, 7%) for the remaining term.

Who Pays for It?

• Buyers can pay for a buy-down themselves

• In many cases, sellers or builders offer it as an incentive, especially in slower markets

When It Makes Sense

• You want lower payments during the first few years of homeownership

• You expect your income to increase

• You plan to refinance before the full rate kicks in

• You’re buying new construction and want to leverage builder credits

Not sure if a buy-down is right for you? I work closely with trusted lenders who can break down the options and calculate your break-even points.