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Understanding Mortgage Buydowns


Houses in a suburban neighborhood with additional designed elements


In this market, many homebuyers are looking for any opportunities to save on their home loan. Sente’s Buydown options could potentially shave thousands of dollars off the first few years a buyer’s loan.

First, what’s a buydown?

A buydown is a way to finance a home loan in an effort to get a lower interest rate/payments for the first year or two of a mortgage. To do this, up-front fees are collected — usually paid for by the builder or seller to lower the buyer’s monthly payments, making the property more affordable.

What are common types of buydowns?

Sente offers both 1-0 (lower rate for the first year) and 2-1 (lower rate for the first two years) buydown options. While these products have been around the mortgage industry for a while, current market conditions — where buyers are starting to have more power — are making this one of the best times we’ve ever seen for buydowns.

  • For the 1-0 buydown, buyers get 1% below their loan’s interest rate for the first year. So if the interest rate on their loan is 6%, they’d only be paying principal and interest at a 5% rate the first year.
  • For the 2-1 buydown, buyers’ principal and interest payment will be 2% below their loan’s rate for the first year and 1% below for the second year.

For the remainder of their mortgage term, the buyers’ payments will be based on the actual interest rate of their loan. It’s important to note that this is a concession that sellers, builders, or others give the buyer. Please contact me or your real estate agent to learn more and see if this is relevant for your situation.

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