An upfront pricing structure that lowers the borrower's rate or payment.
A buydown is a pricing arrangement that lowers the borrower’s mortgage rate or payment, either temporarily or for the full term, by using upfront money.
Buydown matters because it gives borrowers and sellers another way to shape affordability. Instead of changing only the home price or loan amount, the parties can sometimes use money upfront to reduce the payment burden.
It also matters because the term is used broadly. Sometimes it refers to a long-term rate reduction. Other times it refers to a temporary payment reduction in the first years of the loan. Borrowers should not assume every buydown works the same way.
Borrowers encounter buydown discussions during loan shopping and contract negotiation, especially when affordability is tight or when sellers want to help transactions close without reducing price as directly.
The term becomes especially practical when comparing the long-term cost and short-term payment relief of different mortgage structures.
| Buydown type | What changes | Best borrower question |
|---|---|---|
| Temporary Buydown | Early-year payment only | Do I need short-term payment relief? |
| Permanent Buydown | Rate for the full loan term | Will I keep this loan long enough to justify the upfront cost? |
| 2-1 Buydown | Bigger reduction in year one, smaller reduction in year two | Am I solving a short transition period or trying to lower long-term cost? |
A buyer is concerned about the starting payment and explores whether money can be used up front to create a lower initial payment or lower long-term rate. That broad strategy is a buydown.
Buydown differs from Discount Points because discount points are one specific upfront pricing cost, while buydown is the broader concept of using money up front to reduce payment or rate.
It also differs from Temporary Buydown and Permanent Buydown. Those pages describe the two main ways the broader buydown idea is applied.