Buying a home is a major milestone, but rising interest rates can make monthly mortgage payments feel overwhelming. If you’re wondering how to lower your mortgage interest rate or save money on your home loan, a mortgage rate buydown could be the solution. In this guide, we’ll break down what a mortgage buydown is, how it works, and why a 1-0 buydown might be the smartest strategy for homebuyers in today’s market. Using a relatable example, we’ll show you how to reduce your monthly payments and potentially have the seller cover the costs.
What Is a Mortgage Rate Buydown?
A mortgage rate buydown is a strategy where you pay an upfront fee to reduce your interest rate, lowering your monthly mortgage payments. This can be done by purchasing discount points or opting for a temporary buydown, like a 1-0 or 2-1 buydown, which reduces the rate for the first year or two of the loan.
Why Consider a Buydown?
- Lower Monthly Payments: Save hundreds of dollars monthly, especially in the early years.
- Affordability in High-Rate Markets: Make homeownership more manageable when rates are high (e.g., 7% in 2025).
- Seller Contributions: In some cases, sellers can pay for the buydown, reducing your upfront costs.
If you’re searching for ways to reduce mortgage payments or how to get a lower interest rate, keep reading to see how a buydown works in action.
Example: Buying a $600,000 Home
Let’s make this relatable with a real-world scenario. Imagine you’re purchasing a home for $600,000 with a 5% down payment ($30,000). This leaves you with a loan amount of $570,000. Based on current market conditions in 2025, let’s assume an interest rate of 7% for a 30-year fixed mortgage. Here’s how the numbers break down:
- Principal and Interest Payment: $3,792/month
This payment might stretch your budget, so let’s explore two buydown options: paying points and a 1-0 buydown.
Option 1: Paying Discount Points
One way to lower your interest rate is by buying discount points. A point costs 1% of the loan amount and typically reduces the interest rate by 0.25% (varies by lender).
Scenario: Paying One Point
- Cost of 1 Point: $5,700 (1% of $570,000)
- New Interest Rate: 6.75%
- New Monthly Payment: $3,697
- Monthly Savings: $95 ($3,792 – $3,697)
- Break-Even Period: $5,700 ÷ $95 = 60 months (5 years)
While this saves you $95/month, it takes five years to recoup the upfront cost. For many buyers, this long break-even period makes paying points less appealing, especially if you plan to sell or refinance sooner.
Who Should Consider This?
- Buyers planning to stay in the home long-term (5+ years).
- Those with extra cash to cover upfront costs.
Option 2: The 1-0 Buydown Advantage
A smarter strategy for many buyers is a 1-0 buydown, which temporarily reduces your interest rate for the first year of the loan. This is particularly useful in today’s high-rate market (2025), as it provides immediate savings and flexibility.
How a 1-0 Buydown Works
- Year 1 Interest Rate: Reduced by 1% (e.g., from 7% to 6%).
- Year 2 and Beyond: Returns to the original rate (7%).
- Cost: Typically lower than paying points, often covered by the seller.
Scenario: 1-0 Buydown
- Year 1 Interest Rate: 6%
- Year 1 Monthly Payment: $3,417
- Monthly Savings: $375 ($3,792 – $3,417)
- Total Cost: ~$4,500
- Key Benefit: The seller can pay this cost as part of negotiations.
With a 1-0 buydown, you save $375/month in the first year—nearly four times the savings of paying points! Plus, the upfront cost is lower, and if the seller covers it, you pay nothing out of pocket.
Why This Is a Smart Choice:
- Immediate Savings: $375/month can ease your budget in the first year.
- Lower Upfront Cost: $4,500 vs. $5,700 for points.
- Seller Contribution: Common in buyer’s markets, reducing your costs.
- Flexibility: If rates drop in 2026, you can refinance without worrying about recouping points.
Answering Top Mortgage Buydown Questions
What Are the Benefits of a Mortgage Buydown?
- Lower Payments: Save hundreds monthly, especially in the first year(s).
- Affordability: Qualify for a larger loan or a more expensive home.
- Seller Incentives: In competitive markets, sellers may cover buydown costs to close the deal.
Is a Mortgage Buydown Worth It?
It depends on your goals:
- Short-Term Buyers: A 1-0 or 2-1 buydown is ideal if you expect to refinance or sell within a few years.
- Long-Term Buyers: Paying points may make sense if you’ll stay in the home past the break-even period.
- Budget-Conscious Buyers: A buydown with seller contributions minimizes upfront costs.
Can Sellers Pay for a Buydown?
Yes! Sellers often agree to pay for a 1-0 or 2-1 buydown to make their home more attractive. This is a win-win: you get lower payments, and they sell faster.
How Much Does a Buydown Cost?
- Points: 1 point = 1% of the loan amount (e.g., $5,700 for a $570,000 loan).
- 1-0 Buydown: ~$4,500 for a $570,000 loan, depending on the lender.
- 2-1 Buydown: Higher cost (e.g., $8,000-$10,000) but reduces rates for two years (e.g., 5% Year 1, 6% Year 2, 7% Year 3+).
What’s the Difference Between a 1-0 and 2-1 Buydown?
- 1-0 Buydown: 1% rate reduction for Year 1.
- 2-1 Buydown: 2% reduction in Year 1, 1% in Year 2, then back to the original rate.
Why Choose a 1-0 Buydown?
In today’s market, with interest rates around 7%, a 1-0 buydown offers significant advantages:
- Save $375/month in Year 1 for a $570,000 loan.
- Lower Cost: ~$4,500 vs. $5,700 for points.
- Seller-Paid Option: No out-of-pocket cost if negotiated.
- Future Flexibility: If rates drop in 2026, refinance to lock in a lower rate.
This strategy is perfect for first-time homebuyers, those with tight budgets, or anyone expecting income growth in the future.
Tips for Negotiating a Seller-Paid Buydown
- Work with a Skilled Lender: A mortgage professional can structure the deal to include seller contributions.
- Market Conditions: In a buyer’s market, sellers are more likely to cover buydown costs.
- Include in Offer: Specify the buydown in your purchase offer (e.g., “Seller to pay $4,500 for 1-0 buydown”).
Ready to Save on Your Mortgage?
A mortgage rate buydown can make your dream home more affordable, especially with a 1-0 buydown that maximizes savings and flexibility. At Jhenesis Mortgage, we specialize in tailoring mortgage solutions to your needs. Whether you’re a first-time buyer or looking to save in a high-rate market, our team is here to help.
Call us at 407-630-9766 to discuss your options. Ready to get started? Apply now or schedule an appointment with Jhenesis Mortgage to explore how a buydown can work for you!