Temporary vs. Permanent Rate Buydowns

There are two types of buydowns when it comes to the interest rate of your mortgage – temporary and permanent. Temporary rates reduce the interest rate of your mortgage for the first 1 to 3 years. After the buydown period ends, the interest rate reverts to the rate that was originally qualified for. Permanent rates give you the option to permanently buy down the rate of the entire life of the loan.

Temporary buydowns can create upfront savings. They are often referred to as 2/1 or 3/2/1 buydowns. They are funded by the seller only, and they can be used on Conventional, FHA, VA, or USDA loans. Although this rate is temporarily reduced, you must be able to qualify for the mortgage at the permanent rate.

With a permanent buydown, you can qualify for the mortgage at a lower rate, but they can be funded by either the buyer or seller. Additionally, permanent rates can be used with any loan investor, including jumbo or non-traditional mortgage payments.

If you’re interested in learning about which buydown would be best for your situation, reach out to one of our loan officers today! They’d love to answer any questions you have.