Temporary Buydown Options

The most common buydown is the 2-1 buydown. For a buyer to secure a 2-1 buydown they would pay 2.625 points above current market points in order to pay a below market interest rate during the first two years of the loan. At the end of the two years they would then pay the old market rate for the remaining term.

As an example, if the current market rate for a conforming fixed rate loan is 6.0%, the buydown gives the borrower a first year rate of 4.00%, a second year rate of 5.00% and a third through 30th year rate of 6.00% and the cost would be 2.625 points (2.625% of the loan amount).

Another common buydown is the 3-2-1 buydown which works much in the same ways as the 2-1 buydown, with the exception of the starting interest rate being 3% below the note rate.