What Is a Mortgage Rate Buydown and How Does It Work?

A mortgage rate buydown allows borrowers to lower their interest rate through an upfront payment at closing. Depending on the transaction, that cost may be covered by the buyer, a seller concession, or a builder incentive. The lower rate can reduce monthly mortgage payments and improve affordability.

There are two common approaches. A permanent buydown lowers the interest rate for the life of the loan. A temporary buydown reduces the rate for the first one to three years before returning to the note rate. For example, a 2-1 buydown typically lowers the rate by 2 percentage points during the first year and 1 percentage point during the second year.

As buyers continue looking for creative financing strategies in 2026, rate buydowns remain a popular way to manage costs.

Every financial situation is different, so it is important to compare the upfront cost with the potential long-term savings. Jane Horne, your Berkshire Hathaway HomeServices network agent can help you explore available opportunities and connect you with trusted lending professionals to evaluate your options.