How does a temporary buydown lower your first payments?
Your interest rate stays the same. The seller or builder puts money into an account at closing, and it covers part of your payment for the first one to three years.
Is a buydown the best use of the seller’s credit?
Sometimes it is. But the same money could buy your rate down permanently or cover closing costs, and one of those may do more for you. Here’s what I’d want to talk through with you:
- How long will you keep this loan? If you plan to stay put and rates don’t drop, a permanent rate reduction keeps saving you money long after a temporary buydown runs out.
- Can you comfortably afford the full payment today? A buydown gives you breathing room early on, but the full payment arrives in year 2, 3 or 4 either way.
- Do you need cash at closing more than a lower payment? Putting the credit toward closing costs can keep more money in your savings.
- What happens to unused funds if you sell or refinance early? The answer depends on the loan program, so it’s worth knowing before you choose.
I’ll run the buydown, a permanent rate reduction and a closing cost credit side by side so you can see which one wins for you.
This calculator is an educational tool. Results are estimates based on the numbers you enter and show principal and interest only, not taxes, insurance, HOA dues or mortgage insurance. It isn’t an offer of credit or a quote of any rate or payment. Buydown availability, who can pay for it, and how you qualify depend on the loan program. Not a commitment to lend. All loans subject to credit and underwriting approval. Restrictions apply. Fiona Bryan, NMLS #1812932, Empire Home Loans.