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Temporary Buydown: Its Benefits For The First-Time Home Buyers

Purchasing a home is a big and responsible decision we have to make in life. Besides finding the right home, buyers have to worry about mortgage rates, down payments, and other associated costs. For first-time buyers, these costs can be especially daunting. To ease the burden, many lenders offer temporary buydown programs. These programs can provide significant benefits if you know how to take advantage of them. Read the article to learn more about the 2-1 buydown program and why you should consider it when buying a home.

What is a temporary buydown?

A temporary buydown mortgage is a financing technique where the lender agrees to temporarily lower the interest rate for a certain period. This can be an attractive option for borrowers who are expecting to increase their income in the near future and want to save on monthly payments during that time. The interest rate will typically revert to the original rate after the buydown period expires, so it is important to factor this into your long-term financial planning. 

The most common type of temporary buydown is a 2-1 buydown, which reduces the interest rate by 2% in the first year and 1% in the second year. This is typically achieved by making an upfront deposit into an escrow account, with a portion of the deposit being released each month to reduce the borrower’s monthly payment. While a temporary buydown can provide welcome relief in the short term, it is important to remember that the lower interest rate will only last for a limited time. 

2-1 buydown mortgage example

Let’s say you applied for a 2-1 buydown program, where you get a 2% interest rate discount for the 1st year and a 1% discount for the second one. So, it means if your current mortgage rate is 6%, you will only pay 4% for the first year, and the next year your rate will be 5%. Keep in mind that starting from the 3rd year, the interest rate will be 6% for the rest of the loan.

Pay attention that with a 2-1 buydown, the buyer puts down 20% of the home purchase price. The lender finances the remaining 80% of the price, and the interest rate on the loan remains fixed for the whole life of the loan. 

Temporary 2-1 buydown benefits

The Buydown mortgage program is becoming increasingly popular among first-time home buyers looking to save money on monthly mortgage payments. Here are several benefits to consider before applying to this program:

  • Lower monthly payments 

2-1 buydown can help buyers save money in the short term, while still enjoying the low-interest rates that come with a fixed-rate mortgage. The key to getting the most out of this program is to carefully plan ahead and make sure that your income will indeed increase as expected. 

  • Extra cash for renovations 

This type of program can be beneficial for homebuyers who are expecting to make repairs or improvements to their homes in the near future. By saving money upfront, they can use the extra cash to pay for necessary repairs or renovations. 

  • Protection from rising interest rates 

A 2-1 buydown mortgage can also be beneficial for homebuyers who are concerned about rising interest rates in the future. By locking in a low-interest rate for the first two years of the loan, they can avoid paying higher interest rates down the road. 

How to take advantage of a 2-1 buydown

LBC Mortgage buydown program offers a number of advantages for borrowers. By allowing the seller to pay for the buydown, we help keep borrowing costs low. In addition, our program offers a number of benefits that can help borrowers save money over the life of their loan. 

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Buydown program vs. discount points

A buydown is a loan program that allows the borrower to make lower monthly payments during the first few years of the loan. This can be an attractive option for borrowers who expect their incomes to increase over time or who need lower payments in order to qualify for the loan. 

Discount points are a form of pre-paid interest that is used to buy down the interest rate on a loan. One point is equal to one percent of the loan amount. Discount points are paid at closing and most borrowers pay between one and four points. Borrowers who plan to stay in their home for a long time may benefit from paying discount points, as they will save money on interest over the life of the loan.


Who pays for a 2-1 buydown?

LBC Mortgage program is a great way for borrowers to save money and get the most out of their home loan. It is the seller who pays for the buydown, which allows the borrower to enjoy the benefits of the program.

What are the cons of a buydown program?

A 2-1 buydown has a high upfront cost, and may only be worth it for the buyer if they can get the buydown via a seller concession. As a seller concession, the buydown becomes part of the closing costs that the seller pays to help the buyer by reducing their closing costs. While this option may be attractive to some buyers, it is important to remember that the long-term effects of a buydown must be considered carefully before entering into such an agreement. 

Should I consider a buydown when taking a mortgage?

A buydown program gives a great opportunity for buyers to start their mortgage journey at a lower interest rate. And here is why you should consider it when deciding on a mortgage:

  • It can reduce your monthly payments during the first 2 years of home ownership when you may be tight on cash. 
  • It can provide financial security during the early years of homeownership, when you may be more likely to experience tough times or economic hardship. 


A 2-1 buydown mortgage is a great way to lower monthly payments during the early years of home ownership when they are typically the highest. If you are looking for ways to save on your monthly mortgage payment, this may be a good option for you. 

Contact LBC Mortgage today for more information on the best mortgage programs for buying a home.

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