Question 1

Who pays for the buydown?

Accepted Answer

The buydown cost can be paid by the seller, builder, lender, or even the buyer. In most cases, it's negotiated as a seller concession, meaning the seller covers the cost at closing. This is especially common in buyer's markets or with new construction.

Question 2

Can I refinance during the buydown period?

Accepted Answer

Yes! You can refinance at any time during the buydown period. If rates drop significantly, refinancing could lock you into a permanently lower rate. Any unused buydown funds remaining in escrow are typically applied to your loan balance.

Question 3

What happens to the buydown funds if I sell the home?

Accepted Answer

If you sell before the buydown period ends, the remaining unused funds in the escrow account are typically applied to your loan payoff balance, effectively reducing what you owe at closing.

Question 4

Is a buydown the same as buying discount points?

Accepted Answer

No. Discount points permanently reduce your rate for the life of the loan. A temporary buydown only reduces your effective rate for 1-3 years, after which your payment returns to the original note rate. Buydowns are ideal when you expect rates to drop and plan to refinance.

Question 5

What loan types qualify for a temporary buydown?

Accepted Answer

Temporary buydowns are available on Conventional, FHA, and VA loans. They must be owner-occupied properties. The note rate (the rate you qualify at) remains the same. The buydown simply reduces your monthly payment during the initial years.

Question 6

How is the buydown cost calculated?

Accepted Answer

The buydown cost equals the total difference in monthly payments over the buydown period. For example, in a 2-1 buydown, it's the savings from Year 1 (2% below note rate) times 12 months, plus the savings from Year 2 (1% below note rate) times 12 months.

Question 7

Why would a seller agree to pay for a buydown?

Accepted Answer

Sellers often prefer buydowns over price reductions because the cost is typically less than a comparable price cut, yet it makes the home more affordable for buyers. It can also help the seller's home stand out in a competitive market and attract more offers.

See Exactly How a Buydown Saves You Money

Buydown Savings Calculator

How Temporary Buydowns Work

Upfront Funds

Reduced Payments

Full Rate Resumes

Frequently Asked Questions