Lower Your Payments
While You Settle In
How a rate buy down could help lower payments in your first years which allows you more freedom to furnish, update, and settle in.
What Is a Buydown?
Buying a home comes with plenty of new expenses: furniture, repairs, moving costs, and everything in between. A buydown can ease that transition. With a temporary buydown, your interest rate is reduced for the first year or more of your loan. That lowers your monthly payment while you get settled, and then your rate moves to your fixed note rate for the rest of the loan.
At John Adams Mortgage, we’ll walk you through whether a buydown fits your budget, your timeline, and your goals.
How a Buydown Works
A temporary buydown lowers your interest rate, and your monthly payment, for a set period at the start of your loan. The cost of that reduction is paid upfront and held in an account that covers the difference between your reduced payment and your full payment.
Common buydown structures include:
1-0 buydown: Your rate is reduced by 1% for the first year.
1-1 buydown: Your rate is reduced by 1% for the first two years.
2-1 buydown: Your rate is reduced by 2% in year one and 1% in year two.
3-2-1 buydown: Your rate steps down by 3%, 2%, then 1% over the first three years.
Key Benefits
Things to consider
• Lower payments up front: More breathing room in your budget during your first years in the home.
• Time to plan ahead: Use the savings to furnish your home, tackle updates, or build your cushion.
• A smart negotiating tool: Asking a seller or builder to fund a buydown can be a valuable alternative to a price reduction.
• The savings are temporary: Your payment will increase once the buydown period ends, so plan your budget around the full payment.
• Someone covers the cost: Whether it’s you, the seller, or the builder, the buydown is paid for upfront. Make sure you understand how it fits into your overall costs.
• Refinancing isn’t guaranteed: Some buyers hope to refinance before the full rate kicks in. However, future rates and qualifying can’t be predicted.
Is a Buydown
Right for You?
A buydown may be a good fit if:
A seller or builder is offering to cover the cost
You’re expecting your income to grow in the next few years
You want extra flexibility while you settle into your new home
Talk to a John Adams Mortgage Loan Officer
Every buyer’s situation is different. Our local loan officers can compare a buydown side by side with your other options and show you what your payments would look like in each year of your loan.