Temporary buydowns
Your payment is about to step up.
If a builder or seller bought your rate down when you closed, the date your payment changes is already written in your loan documents. It is not a surprise and it is not negotiable — but it is knowable, and there is more you can do about it three months out than three weeks out.
Who this is for
You closed in the last couple of years
Through most of the recent market, builders and sellers across Frisco, Prosper, Celina and McKinney have been closing deals with a rate buydown rather than a price cut. If that was you, your first year or two of payments have been subsidised and you may not have thought about it since.
This page is for you if any of these sound familiar: your loan documents mention a “2-1” or “3-2-1”, your builder advertised a rate noticeably below the market at the time, your closing statement showed money going into a buydown or subsidy account, or your payment has already gone up once and you are not sure why.
What it actually was
Not a lower rate — a pot of somebody else's money
A temporary buydown was never a lower interest rate. Your note rate is your note rate; it is on your loan documents and it has not changed.
What happened instead is that somebody — usually the builder or the seller — put a lump of money into an account at closing. Each month that account has been topping up the difference between what you pay and what the loan actually costs. When the account runs out, you pay the full amount.
So a “2-1” means the rate you feel is two points lower in year one, one point lower in year two, and the real rate from year three. The steps are annual and they are on a schedule, not a market.
Two things almost nobody is told
You were approved at the full rate. Lender guidelines require it — the subsidy is not allowed to help you qualify. A lender already looked at your income against the full payment and said yes to it before you moved in.
Money left in the account is generally not forfeited if you sell or refinance early. It is usually applied to the payoff. Worth confirming in your own buydown agreement, because most people assume the opposite.
Your options
Three things you can do, honestly ranked
Budget for it
Unglamorous, free, and right more often than the other two. The payment was approved against your income. If it fits, you are done — and knowing that is worth the ten minutes it takes to check.
Refinance, if it pays
Only worth it when the gap between your note rate and what is available covers the cost of doing it, given your balance and how long you are staying. That is arithmetic, not opinion. It either clears or it does not.
Reduce the balance
A lump sum against principal, or a recast — where the servicer re-amortises the loan over the remaining term, usually for a small fee, without changing your rate. Rarely mentioned, occasionally exactly the right tool.
When to act
Three months out, not three weeks
Every option above takes time. A refinance runs weeks from application to closing. A recast needs the lump sum in hand and the servicer’s process is not fast. Budgeting for a higher payment is easier decided in advance than discovered.
What I would avoid is deciding in the month the payment changes, because by then the only option left is the one that requires no preparation.
Worth reading alongside this: how a 2-1 buydown actually works, which goes through the mechanics and the arithmetic in more detail.
Check my buydown
Tell me the two numbers and I'll run all three
Your note rate and when you closed are on your loan documents. That is enough for me to work out what each option does to your payment.
Go deeper
Worth reading next
How a 2-1 buydown actually works
It is a pot of someone else's money spent lowering your payment for two years, not a lower rate. You are qualified at the full rate, the payment rises 24% by year three, and if you sell or refinance early the unused portion is not lost. All of which is fine — if you knew.
Read itYour Loan Estimate, line by line
Three pages, forty-odd numbers, and a legal design that almost nobody uses properly. Every lender must give you the same form in the same order, which makes it the one document that genuinely compares them. Here is every section, what it means, and which figures are allowed to change before closing.
Read itWhy the Fed cutting rates doesn't lower your mortgage
Mortgage rates track the 10-year Treasury, not the Fed. Between September 2024 and January 2025 the Fed cut about 80 basis points while the 10-year rose about 90 — they moved in opposite directions. Here is what actually sets your rate, and what the spread in the header of this site is telling you.
Read itRather just talk it through?
Fifteen minutes and your loan documents. No credit pull, no cost, and a straight answer about whether doing nothing is the right call.