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You may have heard the term “temporary buydown” during your new home search in Atlanta, but what does it mean? We asked Shachi Bhardwaj of BankSouth Mortgage to give us the details on how this financing arrangement works to help you understand its benefits.

What Is a Temporary Rate Buydown?

A buydown is a way for a borrower to obtain a lower interest rate for a period of time. When offered by one of our preferred lenders in Atlanta, Empire will purchase discount points against the buyer’s mortgage loan which is the equivalent of paying interest upfront at closing. It allows the buyer to make lower mortgage payments for the first few years of their loan, with payments increasing slightly once the buydown period is over.


A builder-paid buydown allows Empire to reduce the buyer’s monthly mortgage payment for an initial period — typically one or two years — and can bring the borrower significant savings. The amount of savings each month depends on the terms of the buydown, interest rate, and the loan amount.

How It Works

Depending on your overall goals, this is a great way to reduce your monthly mortgage payment without taking on additional risk with other loan options such as Adjustable-Rate Mortgages (ARMS) since buydowns are fixed-rate programs. Buying a home is an exciting milestone but can come with additional acquisition costs. With our 2-1 Buydown Program, buyers are able to lock in lower mortgage payments for the first two years, making it easier to transition to homeownership and move on their own timeline. Between things like new furniture, blinds, and appliances; a seller paid buydown is a great solution to help offset out-of-pocket expenses. There are six buydown programs that buyers can take advantage of when certain eligibility requirements are met. Here are the details:


  • Buydowns are available for Conventional, FHA, and VA loan programs.
  • They are only offered on 30-year fixed purchase loan programs.
  • The borrower must qualify at the final interest rate and meet all loan guidelines.
  • The home must be the buyer’s new primary residence.

2/1 Buydown

  • The buydown period on a 2/1 Buydown is two years.
  • In year one, the mortgage payments are based on an interest rate that is 2% below the actual interest rate of the mortgage, which is called the Note rate.
  • In year two, the mortgage payments are based on an interest rate that is 1% below the Note rate.
  • In year three and the remaining years of the loan, the mortgage payments are based on the Note Rate.
  • The borrower saves money each month during the 24-month buydown period by having lower monthly payments.

1/0 Buydown

  • The buydown period for a 1/0 Buydown is one year.
  • In the first year, the buyer’s mortgage payments are based on an interest rate that is 1% below the Note rate.
  • In year two, the borrower starts paying the mortgage based on the Note Rate and will continue to do so for the remaining payments on the loan.
  • The borrower saves money each month during the 12-month buydown period by having lower monthly payments.


If you’re purchasing a home valued at $600,000 with 10% down, the monthly principal and interest payment would be approximately $3,413 at a 30-year fixed rate of 6.5%. But with a 2-1 buydown, here’s how things change:


  • Your monthly payment for the first year would be around $2,736 ($677 lower at the 4.5% discounted rate for the first year).
  • Your monthly payment in year two would be around $3,066 ($347 lower at the 5.5% discounted rate for the second year).
  • This translates into savings of $8,124 for the first year, and approximately $4,164 for the second year — total savings of $12,290 over the two-year period.
  • In comparison, if you used $12,000 to negotiate a lower sales price to $588,000, your monthly payment at 6.5% is $3,344 — a difference of only $99.

The Benefits

Buydowns reduce your interest cost, making your dream home that much more attainable. In today’s market, they allow you to take advantage of today’s home prices and lower payments, saving you money during the initial loan term and allowing you to ease into your homeownership experience.


  • A buydown temporarily reduces your interest rate, saving you (the borrower) money and lowering your payments during the initial buydown phase.
  • The Builder pays the buydown fee, not the borrower.
  • This type of financing arrangement could make sense for homebuyers whose income will increase in the years to come.


The buydown funds are held in an escrow account and if and when the rates drop, you can refinance into a lower monthly payment for the remainder of the term. The balance (if any) of the funds in the escrow account will be applied to your principal balance if you refinance before the buydown period is complete. In other words, you will not lose any of the un-utilized seller-paid buydown funds.

Is It Right For Me?

When it comes to finances, the best way to determine what’s right for you is to speak with a Mortgage Loan Officer. These industry experts can point you in the direction of the best financing options based on your individual scenarios, goals and needs.


Next, discover our preferred lenders, the benefits of buying a new home, and the top reasons to move to Atlanta.


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Vanessa & Jazmin

New Home Specialist


Vanessa & Jazmin

New Home Specialist


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