A buydown lowers your mortgage rate in exchange for an upfront payment — from you, the seller, or the builder. Done right it can save thousands; done blindly it's an expensive illusion. Here's how to tell the difference.
Temporary buydowns: the 2-1 and 1-0
A 2-1 buydown cuts your rate by two points in year one and one point in year two, then floats to the note rate. It softens the landing on a new payment — ideal if your income is growing or you expect to refinance. The subsidy sits in escrow and any unused balance credits back if you refinance early.
Permanent buydowns: discount points
Paying points — typically 1% of the loan per 0.25% of rate — lowers the rate for the life of the loan. The only question is break-even: divide the cost by the monthly saving. If you'll stay past that date, points win; if not, keep the cash.
Who should pay for it?
Builders and sellers fund buydowns far more often than buyers realize, especially in slower markets. A seller credit toward a 2-1 buydown can beat a price cut — lower payment for you, same net for them. Always ask; we negotiate these weekly.
When to walk away
If the buydown cost exceeds your likely savings before a move or refinance, skip it. Send us any buydown quote and we'll model the break-even free — usually within one business day.