Buy Down Your Rate, Not Your Dreams: Afford a Home Even with Higher Rates
January 29, 2025
High mortgage rates might have you feeling like homeownership is out of reach, but here’s the good news: it’s still a great time to buy. Why? Because buydown programs offer creative ways to lower your monthly payments, making your dream home more affordable right now.
Buydowns allow you to lower your interest rate temporarily or permanently, reducing your monthly payments. If you’re ready to learn how these programs work—and why they could be the key to unlocking the front door of your new home—read on.
What is a Buydown?
A buydown is a financing option where you or the seller pays an upfront fee to reduce your interest rate, either temporarily or permanently. This can significantly lower your monthly payments, especially in the early years of your loan. Read on to discover the three main types of buydown programs.
3-2-1 Temporary Buydown
This option gives you a lower interest rate for the first three years of your mortgage:
- Year 1: 3% rate reduction
- Year 2: 2% rate reduction
- Year 3: 1% rate reduction
- Year 4 – 30: rate will revert to the original note rate for the remainder of the term
For example, on a $400,000 loan at 7.0% (7.75% APR) interest, you could save $751.55 per month in the first year alone!*
2-1 Temporary Buydown
This simpler option gives you two years of reduced rates:
- Year 1: 2% rate reduction
- Year 2: 1% rate reduction
- Year 3 – 30: rate will revert to the original note rate for the remainder of the term
With the same $400,000 loan, you’d save $513.92 per month in year one and $263.01 in year two.* It’s an excellent way to start your homeownership journey with smaller payments upfront.
Permanent Buydown
If you’re thinking long-term, a permanent buydown is worth considering. By paying a fee at closing, you reduce your interest rate for the entire life of your loan.
For instance, on a $400,000 loan, buying down two points could save you over $132 per month.* Over 30 years, that’s a significant reduction in both your monthly payments and overall interest costs.
Why a Buydown Makes Sense Now
Smaller Payments in Early Years
Temporary buydowns allow you to ease into homeownership with reduced payments, giving you more financial flexibility in those crucial first years.
Flexibility to Refinance
You can refinance if rates drop. With some buydown programs, any unused funds are applied toward your loan balance.
Seller Incentives
In today’s market, sellers are often willing to cover buydown costs as part of the deal, making this option even more attractive.
Is a Buydown Right for You?
If you’ve been holding off on buying because of higher rates, buydowns might be the solution you’ve been looking for. They’re designed to make your dream home affordable today while keeping your long-term financial goals intact.
Don’t let high rates keep you from moving forward. Contact us today to see how a buydown program could work for you. Your dream home is closer than you think!
* Interest Rates are based upon a loan to value (LTV) of 80% or below, credit score of 760 and above, and fully disclosed/supported income documentation on a single family, detached residential property. Eligibility requirements apply. Buydown Program constitutes a credit towards the loan amount and discount points for the loan. This seller credit can be structured and negotiated to be paid by the property seller, builders company and/or the buyers party. Terms and conditions apply to all buydown mortgage programs, including the 3-2-1, 2-1 and 1-0 option. Consult Semper Home Loans as some restrictions apply, and not all properties and transactions allow a buydown program.
Categories: Finding a Home, helpful tips, Home Loan Information, Interest Rates, Loans
Tags: buydown, Home Loan, mortgage rates