A buydown that lowers the mortgage rate for the full loan term.
A permanent buydown lowers the mortgage rate for the full life of the loan rather than only for an initial period.
Permanent buydown matters because borrowers planning to keep the mortgage for a long time may prefer lasting savings over short-term payment relief.
It also matters because the benefit comes with an upfront cost. Borrowers need to judge whether the long-term rate reduction is worth the extra money paid at closing.
The term also matters because borrowers can hear “buydown” and assume every buydown works the same way. A permanent buydown changes the long-run loan pricing, not just the first few payments.
Borrowers encounter permanent buydown choices during quote comparison and loan-structure discussion.
The term becomes most practical when the borrower is deciding whether to spend more at closing in order to reduce the note rate and monthly payment for the entire loan term, often by paying Discount Points.
| Choice | Best fit question |
|---|---|
| Temporary Buydown | Do I mainly need help in the first years of ownership? |
| Permanent buydown | Am I likely to keep this loan long enough for the upfront cost to pay off? |
| Discount Points | What is the direct upfront pricing trade for lowering the note rate? |
A borrower pays more upfront at closing to lock in a lower rate that lasts for the whole mortgage instead of only the opening years. That long-term reduction is a permanent buydown.
Permanent buydown differs from Temporary Buydown because the permanent version reduces the rate for the full term, not just for the first years.
It also differs from Discount Points. In many transactions discount points are the mechanism used to achieve a permanent buydown, but the buydown concept describes the lasting effect while points describe the upfront charge.
It also differs from Teaser Rate. A teaser rate is an attractive introductory rate concept, while a permanent buydown is meant to create a lasting reduction across the full loan term.