Buydown Agreement

A 2-1 buydown is structured in the same way, but its discount is only available for the first two years. If a borrower got a US$100,000 loan for 30 years at a fixed rate of 6.75%, they were able to reduce their payments in the first two years with a 2-1 buydown. With a 2-1 buydown, they could pay 4.75% interest in the first year and 5.75% interest in the second year. In the following years, their payments would increase at the standard rate of 6.75% and they would pay 649 $US per month. The savings they made in the first two years would have been offset by subsidies paid by the seller to the lender who granted them the two-year discount. A buydown is a mortgage financing technique by which the buyer tries to get a lower interest rate at least for the first few years of the mortgage or perhaps for the entire life. .