A builder is offering us a "2-1 buydown" on the new house we're considering. The first year's interest rate sounds great, but I'm not sure I understand the catch. What is a buydown, and is it worth it?
You are right to ask. A buydown can be a real benefit or a clever bit of marketing, depending on the details. Let me walk you through it.
A mortgage rate buydown is exactly what it sounds like: someone pays money upfront so that your interest rate is lower than the market rate. There are two main types, and they work very differently.
A temporary buydown, the 2-1 your builder is offering, reduces your rate for the first two years only. In year one, your rate drops by 2%. In year two, by 1%. In year three, you pay the full note rate for the remaining life of the loan. On a $400,000 loan at a 6.25% note rate, a 2-1 buydown can save roughly $500 a month in year one and about $260 a month in year two. Real money, but only for 24 months.
Here is the important part: you must still qualify for the loan at the full note rate, not the lower starter rate. We need to know you can comfortably afford the eventual full payment, not just the discounted one.
A permanent buydown, also called paying discount points, reduces your rate for the entire life of the loan. Roughly one point, 1% of the loan amount paid upfront, lowers your rate by about 0.25%. The break-even point is typically five to six years. If you plan to stay in the home longer than that, a permanent buydown often wins. If you may move or refinance sooner, a temporary buydown is usually the better deal.
The best news: in today's market, the buydown is often paid by the seller or builder, not the buyer. About two-thirds of sellers in 2026 are offering concessions of some kind. A buydown costs the seller less than an equivalent price cut and looks similar to the buyer's eye.
Ask us to run both buydowns side by side, with the break-even math spelled out clearly. We won't mind the question.