2-1 Temporary Buydown

A 2-1 temporary buydown reduces the borrower’s effective payment during the first two years while the underlying note rate remains unchanged.

Typical Structure

If the note rate is 6.50%, a common 2-1 structure could produce a first-year payment equivalent to 4.50%, a second-year payment equivalent to 5.50%, and the full 6.50% note-rate payment beginning in year three.

The Note Rate Does Not Step Up

The mortgage is not gradually changing from 4.50% to 6.50%. Temporary subsidy funds cover part of the required payment during the buydown period.

Potential Funding Sources

Depending on the loan program and transaction, permitted sellers, builders, or other interested parties may fund the buydown, subject to program limits and requirements.