Temporary Buydown
Direct definition
A temporary buydown lowers a borrower's monthly payment for an initial period by using upfront funds to subsidize the interest rate before it steps up to the note rate.
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
Common structures include 2-1 buydowns, where the rate is reduced by 2% in year one and 1% in year two before returning to the full note rate. Funds for the buydown may come from the seller, builder, or lender, and availability varies by program and lender.
Why it matters
A temporary buydown can ease the transition into homeownership with lower initial payments, but borrowers should plan for the payment increase once the subsidy period ends.
Where you may see it
- Loan estimate
- Buydown agreement
- Closing disclosure
A real-world example
Educational and illustrative only
A common misunderstanding
A temporary buydown does not change the actual note rate of the loan — it subsidizes payments for a limited period only.
Frequently asked
Who pays for a temporary buydown?+
It can be funded by the seller, builder, or sometimes the lender, depending on the negotiated terms and program.
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- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026