What Is a Buydown in Real Estate?

A buydown in real estate is a financing strategy that temporarily lowers a buyer’s mortgage interest rate. The seller, builder, or lender pays upfront fees—called discount points—to reduce the interest rate for a set time, making early monthly payments more affordable.

💰 How a Mortgage Buydown Works

A common example is the 2-1 buydown, where the mortgage rate is 2% lower in the first year and 1% lower in the second year before returning to the full rate. The cost difference is paid upfront, usually by the seller or builder, as an incentive to make the home more affordable.

  • 2-1 Buydown: Rate is 2% lower in year one and 1% lower in year two.
  • 3-2-1 Buydown: Rate drops 3%, 2%, then 1% over the first three years.
  • Permanent Buydown: Discount points lower the interest rate for the life of the loan.

Unlike a refinance, a buydown doesn’t change the loan terms permanently—it’s a short-term reduction that helps buyers manage costs during the early years of ownership.

✅ Benefits of a Buydown

  • Helps buyers qualify more easily by lowering initial payments.
  • Encourages quicker sales in high-interest markets.
  • Gives sellers a competitive edge when listing their property.
  • Can be used creatively with assumable mortgages or ARMs.

🏡 Buydowns for FSBO Sellers

FSBO sellers can offer a buydown as a closing incentive to attract buyers facing higher interest rates. Through Brokerless, you can list your property directly on the MLS, mention the buydown incentive in your listing remarks, and appear alongside agent-listed homes — without paying a 6% commission.

Many sellers pair buydowns with other creative options like buyer pre-approval, fixed-rate loans, or adjustable-rate mortgages (ARMs) to make their listings more appealing.

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