Temporary Buydown

What is a Temporary Buydown?

A temporary buydown allows the seller or builder of a primary residence to pay a lump sum amount at closing on a buyer's behalf in order to lower the buyer's monthly mortgage payments for a period of 2 years.

How does a temporary buydown work?

With a 2-1 buydown, for example, a buyer's monthly payment would reflect the equivalent of a 2% rate reduction during the first year and the equivalent of a 1% rate reduction during the second year. Thus, the buyer's monthly payment is lower during the first two years of the loan. In year 3, the buyer's monthly payment would return to the full amount for the remaining life of the loan.