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Temporary Buydowns (2-1 & 1-0) in California: Lower Payments Early On

A temporary buydown lowers your mortgage payment for the first year or two, then it returns to the normal rate. It is often paid by the seller or builder to make a home more affordable at first. This page explains how it works and its limits, in plain language.

This is different from paying points, which lowers your rate for the whole loan. A temporary buydown is short-term relief. Let's break it down.

Wooden percent blocks under house roofs representing a temporary rate buydown
Quick answer

A temporary buydown reduces your interest rate for the first one or two years, then steps up to your full rate. With a 2-1 buydown, your rate is 2% lower in year one, 1% lower in year two, then normal from year three on. A 1-0 buydown lowers the rate 1% in year one only. These are usually paid by the seller or builder, not you.

What this means

A temporary buydown gives you a lower payment when you first move in, when money is often tight. The "savings" come from an upfront amount (often a seller or builder credit) placed in a special account that subsidizes your payment for the first year or two.

Important: your actual loan rate (the "note rate") does not change. The buydown just covers part of your payment temporarily.

Step by step

How It Works (Step by Step)

1
Negotiate the buydown. Often the seller or builder agrees to pay for it.
2
Funds go into an account. This subsidizes your payment in the early years.
3
You pay a lower amount early. For example, 2% lower in year one with a 2-1.
4
The payment steps up. Each year it rises toward the full rate.
5
Full rate from then on. After the buydown period, you pay your normal rate.

2-1 vs 1-0 (Quick Compare)

Year2-1 Buydown1-0 Buydown
Year 12% below note rate1% below note rate
Year 21% below note rateFull rate
Year 3+Full rateFull rate

Temporary Buydown vs Points

FeatureTemporary BuydownPoints
How longFirst 1–2 yearsWhole loan
Who paysOften seller/builderUsually the buyer
Rate changeTemporaryPermanent

See Points & Credits.

Requirements (At a Glance)

RequirementTypical buydown rule
FundingUsually a seller or builder credit
QualifyingYou often must qualify at the full rate
Loan typeAvailable on many loan programs
PlanBe ready for the payment to rise

Benefits

Lower payments early. Helpful right after moving in.
Often paid by others. Seller or builder credits commonly fund it.
Eases the transition. Gives your budget breathing room.
Time to plan. You can prepare for the higher payment or refinance later.

Potential Drawbacks (The Honest Part)

The payment rises. It steps up after the buydown period.
Not a permanent fix. Your real rate is unchanged.
Qualify at the full rate. Lenders often require this for safety.
Refinance is not guaranteed. Do not assume you can always refinance before the step-up.
Plan for year three. Make sure you can afford the full payment.
Real-world California examples

What it looks like in practice

Example 1 — Seller-paid 2-1 in Sacramento.
Example 1 — Seller-paid 2-1 in Sacramento.

Maria negotiates a seller-paid 2-1 buydown. Her payment is lower in years one and two, giving her time to settle in, then it rises to the full rate.

Example 2 — Builder 1-0 on new construction in the Inland Empire.
Example 2 — Builder 1-0 on new construction in the Inland Empire.

A builder offers a 1-0 buydown to help sell a new home. Marcus enjoys a lower payment in year one. See New Construction (Purchase).

Example 3 — Planning for the step-up in San Jose.
Example 3 — Planning for the step-up in San Jose.

The Lee family takes a 2-1 buydown but budgets carefully so they can comfortably afford the full payment in year three, whether or not they refinance.

Examples are for learning only. Your terms depend on the seller, builder, and loan.

Common mistakes

1Forgetting the payment rises. Plan for the step-up.
2Assuming you can always refinance. Rates may not cooperate.
3Confusing it with points. Points are permanent; buydowns are temporary.
4Qualifying only at the lower rate. Lenders often require the full rate.
5Not negotiating who pays. Sellers and builders often cover it.
6Ignoring the long-term cost. Compare with a permanent option.
Good questions

Frequently asked questions

A way to lower your payment for the first one or two years, after which it returns to the full rate.

Next steps

Make sure the long-term payment fits

A temporary buydown is great early relief, especially when a seller or builder pays for it — but plan for the payment to rise. Make sure you can afford the full payment by year three. EZ Online Mortgage can explain buydown options and make sure the long-term payment fits your budget.

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Keep learning

This page is for education only. It is not a loan offer or a promise of approval, rates, or terms. Qualification depends on your individual circumstances. Equal Housing Opportunity · NMLS #362311 · CA DRE #01871814.

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