A temporary buydown (2-1 or 3-2-1) lowers the payment for the first years by funding a subsidy account. The note rate does not change. When the subsidy ends, you pay the full note payment plus taxes, insurance, and HOA. Who pays for the subsidy — seller, builder, borrower, or a lender credit — is a contract and Loan Estimate question, not a free gift. Snapshot as of 2026-08.
This is not buying discount points. Points lower the note for the life of the loan. A temporary buydown is a payment subsidy with an end date.
Buying points for the life of the loan is discount points: breakeven. A news average is still not your quote: rates hub.
| Question | 2-1 buydown | 3-2-1 buydown |
|---|---|---|
| Payment shape | A 2-1 buydown typically means year 1 is about 2 percentage points below the note rate, year 2 about 1 point below, then the full note payment. The note rate does not change; a subsidy account covers the difference. | A 3-2-1 buydown typically tapers over three years (about 3, then 2, then 1 point below the note) before the full note payment. Year 4 is not a surprise rate hike on the note — it is the payment you already agreed to. |
| Year 3 (and after) | Year 3 is typically the full note payment (the 2-1 subsidy has ended). Taxes, insurance, and HOA still sit on top. | Year 3 is still subsidized (about 1 point below the note on a classic 3-2-1). Year 4 is the full note payment. |
| Not this product | This is not buying discount points. Points lower the note for the life of the loan. A temporary buydown is a payment subsidy with an end date. | Not an ARM. Caps on an adjustable note are a different structure — see ARM caps in plain English. |
Flat buydowns (a single temporary rate for N years) also exist. Model the structure on the LE, not a flyer.
Who pays
The subsidy can be funded by a seller, a builder, the borrower, or sometimes a lender credit. Who pays is a contract and LE question, not a slogan. A “free” buydown is often in the price or in other credits.
On new construction, a builder credit is often in the price or in other concessions. Program caps on seller concessions still apply. A “we’ll buy your rate down” pitch that does not show a subsidy amount on the LE is incomplete.
Year 3 is the planning number
When the subsidy ends, you pay the full note payment plus taxes, insurance, and HOA. Plan for that payment, not only year-one principal and interest. If you expect to refinance before then, still run break-even after costs — a buydown is not a free refinance option.
Model the subsidy and the full payment on the temporary buydown calculator. If you plan to refinance before the subsidy ends, still run break-even after costs — a buydown is not a prepaid refinance.
What happens next
- Get the structure in writing (2-1, 3-2-1, or flat) and who is funding the subsidy account.
- Budget the full note payment, not year-one principal and interest.
- Compare that offer to buying points on two Loan Estimates with the same lock period — different products, different calendars.
Common questions
Keep going
What to do next
Education first. A conversation with a loan officer is how you find out what may actually fit your file.
Loan information is provided by Ondo Real Estate (NMLS ID on file). This is not a commitment to lend, a loan approval, or an offer of credit. Rates, terms, and payments shown are estimates for illustration only, are not a quote, and are subject to credit approval, underwriting, and market conditions. You are not required to use Ondo for financing to buy or sell with Ondo. Equal Housing Lender. Program rules, fees, and county loan limits change. Confirm the current published schedule and lender overlays. Nothing here is a quote, a lock, or a credit decision. Licensing and disclosures