Who pays for a 2-1 buydown?

Usually the seller or builder, as a credit at closing. The money goes into an account that covers the difference in your payment for the first two years. Buyers can pay for it too, but that's less common.

Do I qualify at the lower rate?

Usually not. On most loans you have to qualify at the full note rate, so a buydown lowers your early payments without raising the price you can afford.

What happens if I refinance during the buydown?

Rules vary by loan program, but unused buydown funds are commonly applied to your loan balance rather than lost. Ask your lender how your program handles it before you choose a buydown.

Is a buydown better than a price reduction?

It depends on how long you'll keep the loan and your cash needs. A price cut lowers your loan for its whole life, while a buydown helps for two years. We compare them with your actual numbers.

What Is a 2-1 Buydown? And When a Seller Credit Works Better

With mortgage rates higher than most buyers want, more Utah sellers and builders are offering a "2-1 buydown" to make a deal work. It can be a great tool. It can also be the wrong use of the seller's money. Here's how to tell.

How a 2-1 buydown works

A 2-1 buydown is a temporary reduction in your interest rate:

Year 1: your rate is 2 percentage points below your loan's actual (note) rate
Year 2: your rate is 1 percentage point below the note rate
Year 3 on: you pay the full note rate for the rest of the loan

Your loan is still written at the note rate. The difference in your monthly payment for those first two years is paid from money set aside at closing, usually funded by the seller or builder.

What it costs

The cost of a 2-1 buydown is simply the total of those payment differences over 24 months. On a typical Utah purchase it can run into the thousands of dollars, and the bigger the loan, the bigger the cost.

When a seller pays for it, it counts as a seller concession, and every loan type limits how much the seller can contribute. Those limits apply to the total of all seller credits combined: closing costs, buydown, and anything else.

Temporary vs. permanent buydowns

A permanent buydown uses discount points, paid at closing, to lower your rate for the life of the loan. A temporary buydown like the 2-1 only helps for two years.

If you expect to refinance within a few years, a temporary buydown can make sense, since you may not keep the loan long enough to recoup the cost of permanent points.
If you plan to keep the loan a long time, the same money spent on a permanent buydown or a lower price often saves more overall.

When a seller credit works better as something else

The seller's money can go to a buydown, your closing costs, or a lower price. Here's how we usually think about it:

Use it for closing costs if cash to close is your biggest hurdle. A buydown doesn't reduce what you bring to the table. Our guide on Utah closing costs covers what you'll owe.

Use it for a 2-1 buydown if you have the cash to close, expect your income to rise, or think you may refinance in the next few years, and you want breathing room in the first two years.

Ask for a price reduction if you plan to stay put for a long time. A lower price reduces your loan, your payment, and your property taxes every year, not just the first two.

Remember you qualify at the full rate. On most loans, a buydown makes the first two payments easier but doesn't increase how much house you qualify for.

Pair it with down payment assistance

Buydowns and seller credits can often be combined with Utah down payment assistance, but programs limit how much cash you can receive back and may count seller credits differently. Plan the whole structure before you write the offer.

Run the numbers before you write the offer

We'll compare a 2-1 buydown, a permanent buydown, closing cost help, and a price reduction using the same seller dollars, so you can ask for the option that saves you the most. Book a free call and bring the listing or the builder's incentive sheet.