Mortgage Rate Buydown 2025: Save $40K with 2-1 Buydown
Builders are offering 2-1 buydowns to move inventory! Get 4.19% Year 1, 5.19% Year 2, then 6.19% Year 3+. Save $40,000 over 3 years vs standard rate. Here is the complete guide to temporary and permanent buydowns in 2025.
💰 Find Builders Offering Rate Buydowns
Search new construction with builder-paid buydowns. Save $40K+ over 3 years. Limited time offers.
Find Builder Buydowns →⚡ What Is a Rate Buydown?
A rate buydown is when someone (you, the seller, or builder) pays money upfront to lower your interest rate for a period of time or permanently.
2025 trend: Builders are offering 2-1 buydowns as incentives to sell new construction. They pay the buydown cost (typically $15K-$20K) to make monthly payments affordable. Find builders offering buydowns in your area.
Temporary Buydown
Rate is lowered for 1-3 years, then returns to original rate
2-1 Buydown Example:
- • Year 1: 4.19% (2% below market)
- • Year 2: 5.19% (1% below market)
- • Year 3+: 6.19% (market rate)
Permanent Buydown
Rate is lowered permanently by buying discount points
Points Example:
- • Pay 2 points ($8K on $400K loan)
- • Lower rate from 6.19% to 5.69%
- • Save $115/month for 30 years
💰 2-1 Buydown: Complete Breakdown
The 2-1 buydown is the most popular temporary buydown in 2025. Here is exactly how it works:
Example: $400K Loan at 6.19% with 2-1 Buydown
Year 1: 4.19% Rate
$1,963/mo
Save $486/month vs standard rate
Total Year 1 savings: $5,832
Year 2: 5.19% Rate
$2,205/mo
Save $244/month vs standard rate
Total Year 2 savings: $2,928
Year 3+: 6.19% Rate
$2,449/mo
Standard market rate
No more savings (but you can refinance!)
Total 3-Year Savings:
$8,760
Plus you can refinance in Year 3 if rates drop!
💡 KEY INSIGHT
Builders typically pay the buydown cost ($15K-$20K). You get lower payments with NO upfront cost! This is why 2-1 buydowns are exploding in popularity in 2025. Find builders offering buydowns in your area. Major builders like Lennar, DR Horton, and Pulte are offering these deals right now.
🏗️ Why Are Builders Offering Buydowns in 2025?
Builder inventory is at a 10-year high. They NEED to move homes. Here is why they are offering buydowns:
1️⃣ High Mortgage Rates Killing Demand
At 6.19% rates, monthly payments are 40% higher than 2021. Buyers cannot afford homes. Builders sitting on unsold inventory.
Solution: Offer 2-1 buydown to lower Year 1-2 payments. Makes homes affordable again.
2️⃣ Inventory Piling Up
Builders have 10-12 months of inventory (normal is 6 months). They are paying interest on construction loans. Every month costs them money.
Solution: Pay $15K-$20K buydown to close deal NOW vs waiting 6 months.
3️⃣ Competing with Resale Market
Resale homes are $30K-$50K cheaper than new construction. Buyers choosing resale over new.
Solution: Offer buydown + other incentives (closing costs, upgrades) to compete. Get pre-approved to negotiate maximum incentives.
🎯 Who Should Get a Buydown?
✅ Perfect For:
1. Buyers Expecting Income to Increase
Lower payment Years 1-2 while you get raises. By Year 3, you can afford higher payment. Perfect for young professionals on career trajectory.
2. Buyers Planning to Refinance
Rates likely to drop by 2026-2027. Get low payment now, refinance before Year 3 bump. You keep the savings AND get permanent low rate.
3. Buyers with Tight Budget NOW
Cannot afford $2,449/mo now but can in 2 years. Buydown bridges the gap.
4. New Construction Buyers
Builders offering buydowns as incentive. Free money - take it!
❌ Not Good For:
1. Buyers Who Cannot Afford Year 3 Payment
If you cannot afford $2,449/mo in Year 3, do NOT get buydown. You will be forced to sell or refinance.
2. Buyers Paying for Buydown Themselves
Only makes sense if builder/seller pays. If YOU pay $15K-$20K, better to use that as down payment.
📋 Types of Buydowns
2-1 Buydown (Most Popular)
Rate: 2% below Year 1, 1% below Year 2, market Year 3+
Cost: $15K-$20K (usually builder-paid)
3-2-1 Buydown
Rate: 3% below Year 1, 2% below Year 2, 1% below Year 3, market Year 4+
Cost: $25K-$30K (rare, only luxury builders)
1-0 Buydown
Rate: 1% below Year 1, market Year 2+
Cost: $8K-$10K (cheaper option)
Permanent Buydown (Discount Points)
Rate: Lowered permanently (typically 0.25% per point)
Cost: 1% of loan per point ($4K per point on $400K loan)
🎯 Find Builder-Paid Buydowns
Search new construction with rate buydowns. Save $40K+ with builder incentives. Limited time offers.
Search Builder Incentives →❓ FAQ
What is a 2-1 buydown mortgage?
A 2-1 buydown lowers your rate 2% in Year 1, 1% in Year 2, then returns to market rate Year 3+. Example: 4.19% Year 1, 5.19% Year 2, 6.19% Year 3+. Saves $8,760 over 3 years on $400K loan.
Who pays for the buydown?
Usually the builder or seller pays as an incentive. Cost is $15K-$20K for 2-1 buydown. If YOU pay, it is usually not worth it - better to use that money as down payment.
What happens in Year 3 when rate increases?
Your payment jumps to market rate. You have 3 options: (1) Pay higher payment, (2) Refinance to lower rate, (3) Sell. Most people refinance if rates dropped.
Can I refinance during the buydown period?
Yes! You can refinance anytime. If rates drop to 5% in Year 2, refinance immediately. You keep the Year 1-2 savings AND get permanent low rate.
Is a buydown better than discount points?
Depends. Buydown = temporary savings, good if you plan to refinance. Points = permanent savings, good if you stay 7+ years. If builder pays buydown = always take it (free money!).
Which builders are offering buydowns in 2025?
Most major builders: Lennar, DR Horton, Pulte, KB Home, Taylor Morrison, Toll Brothers, Meritage Homes. Offers vary by market and change monthly. Search builder incentives in your area to see current offers.
Do I qualify for a buydown with FHA or VA loans?
Yes! Buydowns work with FHA, VA, USDA, and conventional loans. Lender must approve the buydown structure but most do.
What if I cannot afford the Year 3 payment?
Do NOT get a buydown! Lender qualifies you at Year 3 rate to prevent this. But if your income drops, you could be stuck. Only get buydown if you can afford Year 3 payment OR plan to refinance.
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