What Is a Temporary Mortgage Buydown?
Reduce your monthly payment with our temporary buydown mortgage, which gives buyers a lower rate and lower monthly payments for 1-3 years at the start of their loan. The seller or builder provides the savings, so there’s no cost to the buyer.
Mortgage buydown structures
There are various structures for buydown terms. The most common buydown structures are a 3-2-1 buydown, 2-1 buydown, 1-1 buydown and 1-0 buydown.
3-2-1 buydown
There are various structures for buydown terms. The most common buydown structures are a 3-2-1 buydown, 2-1 buydown, 1-1 buydown and 1-0 buydown.
| Effective Rate | P&I | Monthly savings | Total savings | |
|---|---|---|---|---|
| Yr 1 | 3.5% | $898.09 | $366.05 | $4,392.60 |
| Yr 2 | 4.5% | $1,013.37 | $250.77 | $3,009.24 |
| Yr 3 | 5.5% | $1,135.58 | $128.56 | $1,542.72 |
| Yr 4+ | 6.5% | $1,264.14 | $0 | $0 |
| Total savings and seller credit | $8,944.56 |
2-1 buydown
The 2-1 Temporary Buydown Mortgage reduces the buyer’s interest rate by 2% for the first year of their loan and 1% for the second year.
EXAMPLE: Sale price: $450,000 | Down payment: $90,000 | Loan amount: $360,000 | 30-year fixed rate: 6.5% | Annual percentage rate: 6.619%
| Effective Rate | P&I | Monthly savings | Total savings | |
|---|---|---|---|---|
| Yr 1 | 4.5% | $1,824.07 | $451.37 | $5,416.44 |
| Yr 2 | 5.5% | $2,044.04 | $231.40 | $2,776.80 |
| Yr 3 | 6.5% | $2,275.44 | $0 | $0 |
| Total savings and seller credit | $8,193.24 |
1-1 buydown
The 1-1 Temporary Buydown Mortgage reduces the buyer’s interest rate by 1% for the first two years of their loan.
EXAMPLE: Sale price: $650,000 | Down payment: $130,000 | Loan amount: $520,000 | 30-year fixed rate: 6.5% | Annual percentage rate: 6.612%
| Effective Rate | P&I | Monthly savings | Total savings | |
|---|---|---|---|---|
| Yr 1 & 2 | 5.5% | $2,952.50 | $334.25 | $4,011 |
| Yr 3 | 6.5% | $3,286.75 | $0 | $0 |
| Total savings and seller credit | $8,022 |
1-0 buydown
The 1-0 Temporary Buydown Mortgage reduces the buyer’s interest rate by 1% for the first year of their loan.
EXAMPLE: $450,000 | Down payment: $90,000 | Loan amount: $360,000 | 30-year fixed rate: 6.5% | Annual percentage rate: 6.619%
| Effective Rate | P&I | Monthly savings | Total savings | |
|---|---|---|---|---|
| Yr 1 | 5.5% | $2,044.04 | $231.40 | $2,776.80 |
| Yr 2+ | 6.5% | $2,275.44 | $0 | $0 |
| Total savings and seller credit | $2,776.80 |
The sample rates provided are for illustration purposes only and are not intended to provide mortgage or other financial advice specific to the circumstances of any individual and should not be relied upon in that regard. CrossCountry Mortgage, LLC cannot predict where rates will be in the future. The payment example does not include assessments. Actual payment obligations may be greater and may vary. Mortgage Insurance Premium (MIP) is required for all FHA loans and Private Mortgage Insurance (PMI) is required for all conventional loans where the LTV is greater than 80%. Rate(s), APR(s) and payment info is valid as of 12/14/2022 and assumes a first lien position, 740 FICO score, 25-day rate lock, based on a single-family home. All terms are subject to change without notice. Loans are subject to underwriting guidelines and the applicant’s credit profiles, not all applicants will receive approval. Contact CrossCountry Mortgage, LLC for more information. Available for conventional, FHA, VA, and USDA loans only. Equal Housing Opportunity. All loans subject to underwriting approval. Certain restrictions apply. Call for details.
How does a temporary mortgage buydown work?
- Buyer signs a temporary buydown mortgage agreement with CCM
- Seller (or builder) funds the temporary buydown mortgage with an upfront deposit
- Amount of seller’s deposit equals amount of buyer’s savings over buydown term
- Deposit held in escrow account
- Funds paid monthly to lower buyer’s mortgage payment
Mortgage buydown advantages
- Immediate impact
- Ease into homeownership (especially helpful for first-time homebuyers)
- Rate protected if rates rise
- Refi later if rates drop
Good for buyers, sellers, and builders
For sellers considering a price cut
- Savings for the buyer without lowering the sale price
For builders who want to move inventory
- An alternative incentive
For buyers stretching their dollars
- Immediate monthly payment savings
- Savings for 1, 2, or 3 years
- A locked rate if rates increase
- Room to refi if rates fall
