A rate buydown lowers a mortgage interest rate in exchange for money paid up front, usually as discount points. Here's how permanent and temporary buydowns work and who can pay for them.
A rate buydown is paying money up front, usually through mortgage discount points, to lower an interest rate. A buydown can be permanent, for the life of the loan, or temporary, for the first years of it, and the cost can be paid by the buyer, the seller, a builder, or offset by a lender.
This is general education about how buydowns work. We're a technology platform, not a brokerage or a lender, and we don't give mortgage advice or quote rates; a licensed lender does.
Per the CFPB, "points lower your interest rate, in exchange for paying more at closing," and one point equals one percent of the loan amount. Lender credits work the other way: a higher rate in exchange for money toward closing costs. Your Loan Estimate shows any points or credits on your loan, and the CFPB's page walks through how points and lender credits work.
A permanent buydown lowers the rate for the whole life of the loan. The points are paid at closing.
A temporary buydown lowers the payment for the first year or years of the loan, funded by money set aside at closing, and then the payment returns to the full rate. Whether a temporary buydown is available, and how it's structured, depends on the loan program and the lender.
When a seller pays for a buydown, it's a seller concession written into the purchase contract. Loan programs limit how much a seller or other interested party can contribute toward the buyer's costs, and those limits differ between conventional, FHA, VA, and USDA loans. Your lender confirms the limit on your loan, and your licensed closing attorney handles the contract terms. For VA loans, see VA loan commission rules: who pays what, which is sourced to VA.
Whether you're buying or selling, VroomBrick charges a 1% technology fee for the platform, paid by the seller at closing. You don't pay an agent commission on the side VroomBrick works with.
On a $400,000 home, a 1% technology fee is $4,000. If an agent on your side charged 3%, that would be $12,000, a difference of $8,000. Commissions are negotiable, so your number depends on what you'd have paid.
VroomBrick is not a mortgage lender and does not quote rates, set loan terms, or fund buydowns.
Paying money up front, usually as discount points, to lower an interest rate. One point equals one percent of the loan amount, per the CFPB.
A permanent buydown lasts the life of the loan. A temporary one lowers the payment only for the first year or years, funded by money set aside at closing.
The buyer, the seller (as a concession in the contract), a builder (as an incentive), or the lender (as a credit for a higher rate), within the loan program's limits.
That depends on your loan and how long you keep it, and it's a question for your licensed lender. The CFPB explains how to compare options.
The mortgage calculator shows how principal and interest change at different rates, and the buyer savings simulator shows the 1% technology fee math. Read how the 1% technology fee works, or see what a buyer closing cost credit is. VroomBrick operates in Virginia, Maryland, and North Carolina.
About VroomBrick: VroomBrick is a real estate technology platform, not a licensed real estate brokerage. VroomBrick does not provide brokerage services, represent buyers or sellers, or hold real estate licenses. VroomBrick charges a 1% technology fee for the platform, paid by the seller at closing. You don't pay an agent commission on the side VroomBrick works with. Closing attorneys, showing agents, and lender partners are independent licensed professionals. Commissions are not set by law and are fully negotiable. Savings examples are illustrative; actual savings vary by transaction.
A rate buydown means paying money up front, usually through discount points, to lower a mortgage interest rate. Per the CFPB, one point equals one percent of the loan amount. How much a point lowers the rate depends on the lender, the loan, and the market; your lender's Loan Estimate shows it.
A permanent buydown lowers the rate for the life of the loan. A temporary buydown lowers the payment for only the first year or years of the loan, funded by money set aside at closing, and then the payment returns to the full rate. Your lender explains how either would work on your loan.
It can be paid by the buyer at closing, by the seller as a concession written into the contract, by a builder as an incentive, or offset by a lender. Loan programs limit how much a seller or other interested party can contribute, and the limit varies by loan type; your lender confirms what applies.
That depends on your loan, how long you keep it, and what the points cost, and it's a question for your licensed lender. The CFPB explains how to compare points and lender credits. We don't give loan advice.
About the Author
MBA · Army Veteran
Head of Partnerships at VroomBrick. Writes about how homeowners can keep more of their equity, what the post-NAR-settlement market actually looks like, and how buying or selling works with a 1% technology fee.
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