Rate buydown
Paying upfront to lower your mortgage rate — permanently with discount points, or temporarily (like a 2-1 buydown) for the first year or two.
What does rate buydown mean?
A buydown reduces your interest rate in exchange for an upfront cost, often paid by the buyer, seller or builder. A permanent buydown uses discount points to cut the rate for the life of the loan. A temporary buydown, such as a 2-1, lowers the rate by two points the first year and one the second before it returns to the note rate — useful when you expect income to rise, or rates to fall so you can refinance.
Frequently asked
What is a 2-1 buydown?
A temporary buydown that cuts your rate by two percentage points the first year and one the second, before it returns to the full note rate in year three.
It is often paid by the seller or builder and suits buyers who expect income to rise or plan to refinance.
Is a rate buydown worth it?
A permanent buydown (points) pays off if you keep the loan past the break-even month. A temporary buydown helps most when someone else pays for it, or when you expect to refinance before the rate steps back up — otherwise the upfront cost may not be recovered.
Put it to use
Mortgage Points Calculator
Decide whether buying discount points to lower your rate pays off, and how long it takes.
Mortgage Calculator
Estimate your monthly principal-and-interest payment and see a full amortization schedule for any home loan.
APR Mortgage Calculator
Convert a rate plus points and fees into the true annual percentage rate (APR) of your mortgage.
Related terms
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