Our Blogs

Buydown Saves $$$ in Buyers Monthly Payments

September 28, 2023

With interest rates a bit higher than we like to see, it might be a good idea for new homebuyers to consider a 2/1 Mortgage Rate Buydown.  What is a buydown? How does it work? Who should consider it?

Let’s look at some of the basics of the buydown finance program.

Simply stated, the 2/1 Buydown is a finance plan that acts as a temporary rate buydown which allows the borrower to pay a lower interest rate for the first two years of the home loan before it stabilizes at a third-year rate.  

Here is an example: If you are purchasing a home for $400,000 and the interest rate for a 30-year mortgage is 6.5%, for the first year the rate will be 4.5% and your payment would be approximately $500 lower for the first 12 months of payments.  For the second year, the rate is 5.5% and the payment is about $260 lower each month.  For years 3-30, the rate would stabilize at the original rate – 6.5%.  At year 3, the homeowner would decide whether to keep that final rate or refinance at the current interest rate at that time if the rate is lower.  If rates continue to rise, the original 6.5% will never change and is a big savings for the homeowner. 

Of course, the buy-down rate is based on the current mortgage interest rate with the first year being 2% lower and the second year being 1% lower.  This program saves the homebuyer thousands of dollars during the first two years of the loan. 

This program is not new and is not a gimmick or trick.  FHA, VA and Conventional loan buydowns have been widely used and appreciated since the late 1970’s when interest rates climbed to as high as 18%.  In those days, Borrowers qualified at the lowest rate and when the buydown ended, some of these borrowers could not afford the payment at the highest rate.  Since then, rules have been put in place to protect homebuyers. Buyers must now qualify for the payment at the highest rate, thus assuring the Buyer that they can enjoy thousands of dollars of savings during the first two years and still comfortably afford payments when the buydown period ends.

The way the program works is simple.  The mortgage lender calculates the difference in the full rate payment and the buydown payment for each year of the buydown.  That amount is put into an escrow account and used to pay the difference in the buydown payment and the full payment each month.  

For a limited time and on all homes closing in 2023, Grant is offering up to $10,000 in buydown credit for Grant new home buyers who use a preferred lender.  Currently, there are 25 homes that qualify for this special program.  These best-selling floorplans are in all the best neighborhoods in Arlington, Oakland and Collierville, TN and in Hernando and Olive Branch, MS.

For more information or to get a list of qualifying homes, call Kristy at 901-713-1070


The level of respect and care was outstanding. I had a terrible experience with another builder previously and was very apprehensive about getting into the market again. I was extremely pleased with my experience with Grant & Co

MONIQUE BOWLES l GWIN FARMS