How it works
Funds are set aside at closing to cover part of your interest early on. In a 1-0 buydown, your rate is 1% lower for the first year.
Who pays
Sellers, builders or lenders often fund buydowns. Where we offer realty services, buying with a CapCenter REALTOR® may also earn a Realty Purchase Credit of up to 0.5% of the purchase price (see Offer details).
Plan for year two
Make sure you can afford the full payment when the buydown ends.
A 1-0 buydown example
On $320,000 at 6.875%, the year-one payment at 5.875% is about $1,893, versus $2,102 at the full rate. That saves about $2,511 in the first year.
Buydown vs. points
- Buydown: savings for one or two years
- Points: savings for the life of the loan
- Buydown funds are often paid by a seller or builder
1-0 vs. 2-1 buydowns
On $320,000 at 6.875%, a 2-1 buydown starts at 4.875% (about $1,693), then 5.875% (about $1,893), then 6.875% (about $2,102).
- 1-0: rate 1% lower for year one
- 2-1: rate 2% lower in year one and 1% lower in year two
What it costs
The cost equals the payment savings. A 1-0 buydown on $320,000 is about the first-year difference. Where we offer realty services, buying with a CapCenter REALTOR® may also earn a Realty Purchase Credit of up to 0.5% of the purchase price (see Offer details).
Qualifying
Lenders usually qualify you at the full note rate, so the buydown helps cash flow but not how much you can borrow.
When a buydown makes sense
- You expect income to rise
- You might refinance if rates fall
- You want lower payments while you settle in
Buydown vs. points vs. price cut
Your agent and loan consultant can compare which saves more for your timeline.
- Buydown: temporary payment relief
- Points: permanent lower rate
- Price cut: lower loan amount and taxes
