Last saved by: Lynn Marie Greaves

What is a Temporary Buydown?
Temporary buydowns are popular in today’s market, because they lower the monthly payment for a homebuyer for a set period of time, usually one to three years. 
How Does it Work?
Funds for a temporary buydown are typically provided by a seller, builder, or lender as a seller concession. For example, a seller may offer a temporary buydown as a way to make their property more attractive to buyers, without lowering the asking price of the home. 
The funds to cover the buydown are deposited upfront into an escrow account at the time of closing. Then, the loan servicer pulls money from that account to make up the difference for each monthly payment, according to the terms of the buydown agreement.
Let’s say the seller is offering a 3-2-1 buydown, and the buyer qualifies for a 30-year fixed-rate loan with a 6.5% interest rate. It may roll out as follows for the buyer.
Year 1: The interest rate is 3.5%.
Year 2: The interest rate is 4.5%.
Year 3: The interest rate is 5.5%.
Year 4: The interest rate returns to the permanent fixed rate of 6.5%.
Buyers should know, they must be able to qualify for the full loan amount at the permanent rate, in order to take advantage of a buydown discount. This is still a great way to ease into homeownership with a reduced interest rate payment.
Give me a call if you have any questions about mortgage planning! My team and I have an eagle eye on the market to secure the best rates and the best loan options for our clients.