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Temporary Interest Rate Buydown Options

A Homebuyer's Guide to Lower Interest Rates

Ease Your Way Into Homeownership

The current real estate market is presenting new opportunities for buyers. Let RWM Home Loans educate you on your options which include temporary interest rate buydown programs. These options will reduce your mortgage payment for the first 1-2 years of your loan as a result of a credit from an interested party. You can use these savings to invest, cover other expenses, or increase your cash reserves.

Buydown Options

2-1 Buydown

  • Payment calculated at 2% below the Note Rate for the 1st year
  • Payment calculated at 1% below the Note Rate for the 2nd year
  • Payment calculated at the Note Rate for the 3rd year through the life of the loan

1-0 Buydown

  • Payment calculated at 1% below the Note Rate for the 1st year
  • Payment calculated at the Note Rate for the 2nd year through the life of the loan

Temporary Interest Rate Buydown FAQ

How does the temporary interest rate buydown work?

As a result of a credit from an interested party, lump sum funds are applied to lower the buyer’s payments for a fixed amount of time. This does not increase the loan amount and they would have the option to refinance if rates decline in the next coming years.

Which loan programs are eligble?

Fannie Mae, Freddie Mac, FHA, VA, and USDA.

Who benefits from a temporary interest rate buydown?

Both the buyer and seller can benefit from a temporary interest rate buydown. For the buyer, it allows them to ease into homeownership by lowering actual fixed rate payments while the loan amount does not change. It’s a safe way to take advantage of a lower payment in a rising rate environment.

It also benefits the seller in helping their home sell faster in buyer markets, especially when price reductions are costlier to a seller than credits.

Who can provide the credit to fund the temporary interest rate buydown?

For most loan programs, the seller, builder, agent, or lender can provide the credit to buydown the buyer’s rate.

Can multiple parties contribute to the credit?

Yes, the the credit can be split between any interested party.

Can I do a buydown on a second home or investment property?

Second homes are eligbile. Investment properties are not.

What happens if I refinance before the 2 years on a 2-1 buydown?

You will receive a refund of the cost it took to buydown the rate.

2-1 Temporary Buydown Scenario

See below for a temporary interest rate buydown example with a $500,000 loan amount and 5.500% note rate. The payment only reflects principal and interest.



Monthly Payment










Total Savings in Years 1-2: $10,800

Based on an 80% LTV ratio, 720 FICO Credit Score, and an APR of 5.552% for sample purposes only and is dependent on the loan amount, income, credit score, and other important details.

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RWM Home Loans is not affiliated with HUD, FHA, U.S. Department of Veteran’s Affairs or any Government Agency. Financing details are for informational purposes only and should not be relied upon by you. APR means Annual Percentage Rate. Rates, program terms, fees, and conditions are subject to change without notice. Not all products are available in all states. All mortgage applications are subject to underwriting guidelines and approval. Additional conditions, qualifications, and restrictions apply. This is not an offer of credit or a commitment to lend. Residential Wholesale Mortgage, Inc. dba RWM Home Loans is licensed by the CA Department of Real Estate #01174642 and the CA Department of Financial Protection and Innovation #4131353 under the California Residential Mortgage Lending Act. Company NMLS #79445. AZ Lic. #0949171; Branch AZ Lic. #0947596; RWM Home Loans AZ Lic. #0947596

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