A seller-paid buydown can temporarily reduce your interest rate and monthly payment, making homeownership more affordable in the early years of your loan.
A seller-paid buydown can temporarily reduce your interest rate and monthly payment, making homeownership more affordable in the early years of your loan.
A seller-paid buydown is when the seller contributes funds at closing to temporarily lower the buyer’s interest rate. This reduces the buyer’s monthly mortgage payment during the first few years of the loan, making homeownership more affordable upfront.
One common example is a 2-1 buydown. In this structure, the buyer’s interest rate is reduced by 2% in the first year and 1% in the second year before adjusting to the full note rate in year three. During the buydown period, the seller covers the difference, easing the buyer into the full payment.
This strategy can benefit both sides. Buyers enjoy lower payments early on, while sellers may attract more interest and create a stronger offer in competitive markets.
A seller-paid buydown can be a smart way to improve affordability without permanently changing the loan structure.