A buydown is money paid at closing to lower your interest rate. A temporary buydown lowers it for the first one to three years. A permanent buydown, bought with points, lowers it for the life of the loan. It is worth it when the savings outlast the cost for as long as you expect to keep the loan.
With a 2-1 buydown, your payment is based on a rate two points lower in year one and one point lower in year two, then the full rate from year three. A 1-0 covers one year and a 3-2-1 covers three. The cost is the total of the payments you are spared, paid up front into an account that makes up the difference each month.
Here you pay points at closing and the rate is lower for the whole loan.
Often the seller, as a credit negotiated in your offer. A builder or the buyer can pay too. When a home has been on the market a while, asking for a credit toward your rate can do more for your monthly payment than the same amount off the price.
The rate buydown calculator on this site shows each year’s payment and the total cost for a 2-1, 1-0 or 3-2-1, using a loan amount and rate you enter.
Which buydowns your loan allows, what each would cost, and how a seller credit could be used. Your lender confirms what applies to your loan.
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