MORTGAGE RATE BUY-DOWNS EXPLAINED: HOW BUYERS CAN SAVE THOUSANDS

With interest rates fluctuating, a mortgage rate buy-down could be the key to making

homeownership more affordable. Understanding how this works can help you save significantly over the life of your loan.

What is a Mortgage Rate Buy-Down?

A mortgage rate buy-down is when a buyer (or sometimes the seller or lender) pays upfront fees to lower the interest rate on a mortgage. This results in lower monthly payments and substantial long-term savings.

Types of Buy-Downs

Permanent Buy-Down: A one-time upfront payment that reduces your interest rate for the entire loan term.
Temporary Buy-Down: Common options include a 2-1 or 3-2-1 buy-down, where the rate is reduced for the first few years before adjusting to the full rate.

Seller-Paid Rate Buy-Downs

Many sellers and builders are now offering rate buy-down incentives to attract buyers. This means that buyers could enjoy reduced interest rates without paying extra costs upfront.

Is a Buy-Down Right for You?

A buy-down can be a great option if you plan to stay in your home long-term. Work with a lender to calculate how much you can save and determine if this strategy aligns with your financial goals.