Lower Your Payment in the Early Years
A rate buydown reduces your mortgage payment for the first 1–3 years, making homeownership more affordable when rates are high—while preserving your options to refinance later if rates drop.
A rate buydown temporarily reduces your mortgage rate for 1–3 years. Funds are deposited into escrow at closing and used to subsidize your payments during the buydown period, after which you transition to the full market rate.
At closing, funds are deposited into escrow. Each month, the lender draws from this account to subsidize your payment. When the escrow is depleted, your payment increases to reflect the full market rate—which was locked in from the start. The buydown is purely a payment subsidy; your interest rate never changes.
The most popular buydown structure:
This graduated structure provides maximum relief when you need it most.
A deeper initial discount extended over three years:
This structure provides greater payment relief in year one but requires larger upfront costs. Ideal if you expect income growth after year 3.
Let's look at a concrete example using a $400,000 mortgage at 7% (the full market rate). Here's what your payments look like with a 2-1 buydown:
A buydown reduces payments during early years, making homeownership achievable when rates are high.
If rates drop by year 3–4, you can refinance at a lower rate while already benefiting from early payment relief.
Many lenders allow qualification based on your year-1 discounted payment, helping you approve and qualify for larger loan amounts.
Here's how the main buydown options stack up:
| Feature | 2-1 Buydown | 3-2-1 Buydown | Permanent Buydown (Points) |
|---|---|---|---|
| Year 1 Discount | 2% lower | 3% lower | Permanent |
| Duration | 2 years | 3 years | Life of loan |
| Typical Cost | $15k–$25k | $25k–$35k | $5k–$10k per point |
| Payment Relief | Highest years 1–2 | Highest year 1 | Consistent lifetime |
| Who Pays | Seller (most common) | Seller or builder | Buyer or seller |
| Refinance Benefit | Yes—rate is locked | Yes—rate is locked | Lost if you refi |
| Best For | Near-term affordability | Extended relief + growth | Staying long-term |
Pay 1% of loan amount to permanently reduce your rate 0.25% for the life of the loan. Benefit persists if you refinance with the same lender.
Subsidize payments for 2–3 years; your rate is locked in permanently. Ideal for short-term affordability and refinancing flexibility.
Spokane's market has a strong tradition of seller concessions. Buydowns are now common negotiating tools, especially with elevated rates. They work well here because sellers can close deals without dropping price, and buyers get affordable early payments.
Whether you're a buyer, seller, or real estate professional, a rate buydown can be a game-changer in today's market. Let's talk about how a 2-1 or 3-2-1 buydown can work for your situation.
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