Buydown
Direct definition
Paying upfront to reduce the interest rate for the first few years — or the entire life — of a loan.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
A permanent buydown lowers the note rate for the life of the loan (discount points). A temporary buydown lowers the effective rate for the first 1–3 years, then steps up. Sellers, builders, or borrowers can fund one.
Why it matters
It reduces early payments and can be a powerful negotiating tool in a slow market.
Where you may see it
- Loan Estimate
- Closing Disclosure
- Purchase contract
A real-world example
Educational and illustrative only
A common misunderstanding
A temporary buydown doesn't lower your actual note rate — it subsidizes your payment for a set period before it reverts to the full rate.
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- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026