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Interest Rate Buydowns Explained: Temporary vs Permanent Savings
Compare 2-1 buydowns, 3-2-1 buydowns, discount points, seller-paid buydowns, and when each strategy may make sense.
Buydowns Convert Cash Into Payment Relief
A rate buydown uses money upfront to reduce the borrower’s payment. It may be temporary, like a 2-1 buydown, or permanent, like discount points.
| Buydown Type | How It Works | Best For |
|---|---|---|
| 2-1 buydown | Lower rate in years 1 and 2 | Short-term relief |
| 3-2-1 buydown | Step-up payment over 3 years | Higher early relief |
| Discount points | Permanent rate reduction | Longer ownership |
Buydown Payment Impact
When It Makes Sense
Buydowns make the most sense with a realistic future plan: rising income, refinance opportunity, seller-funded credit, or shorter ownership horizon.
FAQs
Are points always worth it?
No. The break-even period matters.
Can sellers pay for a buydown?
Often yes, subject to loan program concession limits.
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