Key Takeaways
- A 2-1 buydown lowers your rate by 2% in year one and 1% in year two, then settles at the note rate.
- It’s often funded by a seller or builder credit.
- It eases you into the payment and can be great in a higher-rate market.
- You still qualify at the full note rate.
A 2-1 buydown is one of the most popular ways to soften today’s rates — here’s how it works and who it’s for.
What is a 2-1 buydown?
It temporarily reduces your interest rate: 2% below the note rate in your first year, 1% below in your second year, then the full rate for the remaining term. Your early payments are noticeably lower, giving you room to settle in.
Who pays for a buydown?
Often the seller or a builder funds it as a concession — an attractive alternative to a price cut. The cost is deposited into an account that subsidizes your payment for those first two years. See seller concessions.
When does a 2-1 buydown make sense?
When rates are elevated and you expect income to rise, or you plan to refinance if rates drop. Note: you must still qualify at the full note rate, so it’s a cash-flow tool, not a qualifying trick. talk to David.
Frequently Asked Questions
Do I qualify at the buydown rate or the full rate?
The full note rate. The buydown lowers your payment temporarily but doesn’t change how you qualify.
What happens to leftover buydown funds if I sell early?
Unused funds are typically applied to your loan or returned per the agreement — nothing is wasted.
Is a 2-1 buydown the same as buying points?
No. Points permanently lower your rate; a 2-1 buydown lowers it temporarily for the first two years.
Related resources
See the numbers: the 2-1 buydown calculator shows the year one, year two and note-rate payments plus exactly what the buydown costs to fund.
Working through this in Colorado? I’m David Silva, a mortgage loan officer based in Westminster, CO (NMLS 1352284), licensed in Colorado, California, Georgia and Texas. Take a look at the All In One Loan or all loan programs — or send me your scenario and I’ll tell you straight whether it works.
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