Who Benefits from a Progressive Structure
- Buyers in the early years of a career with clearly rising income (medical residents, associates on partner track, teachers on step scales)
- New-construction buyers whose builder is offering a rate incentive rather than a price cut
- Move-up buyers whose current mortgage payment is temporarily overlapping with the new one
- Borrowers in higher-rate environments who expect to refinance in 2–3 years but want relief now
Temporary Buydowns (Most Common)
A temporary buydown reduces your effective interest rate for the first 1, 2, or 3 years of the loan. The full buydown cost is escrowed at closing — almost always paid by the seller or builder as a concession — and is used to subsidize your payment each month.
2-1 Buydown
Rate is reduced by 2% in year 1 and 1% in year 2, then jumps to the full note rate for years 3–30. Example: on a 6.5% note rate, you pay as if the rate were 4.5% in year 1, 5.5% in year 2, and 6.5% from year 3 onward.
3-2-1 Buydown
Bigger reduction, three-year runway: 3% lower in year 1, 2% lower in year 2, 1% lower in year 3. More common on new construction where the builder is funding a substantial concession.
1-0 Buydown
A single-year, 1% reduction. Lower cost, less relief — useful when a smaller seller concession is available.
Underwriting protection
Permanent Buydowns (Discount Points)
Different tool: paying discount points at closing to permanently lower the rate for the life of the loan. Roughly, 1 point (1% of the loan) buys down the rate by about 0.25%. Breakeven typically runs 4–7 years — attractive if you're staying long-term.
Graduated-Payment Structures (GPM)
Less common today but still available: payment starts below the fully-amortizing amount and increases by a fixed percentage each year for 5–10 years before leveling off. Best suited to specific borrower profiles with strongly rising income — we'll walk through whether it's the right fit for your scenario.
ARM as a Progressive Strategy
A 5/6 or 7/6 ARM offers a lower fixed rate for 5 or 7 years, then adjusts. When you have a clear plan to refinance or sell inside that window, an ARM is effectively a progressive-payment tool — you get a lower payment now and control the reset by exiting the loan.
Common Questions
What is a temporary buydown?
A temporary interest-rate reduction paid for at closing (typically by the seller or builder) that lowers your effective rate for the first 1–3 years. Common structures are 2-1 (2% lower year 1, 1% lower year 2) and 3-2-1. You qualify at the full note rate but pay less during the buydown period.
Do I have to qualify at the reduced rate?
No. All temporary buydowns require you to qualify at the full, un-bought-down note rate, so payment shock at reset is protected against by underwriting from day one.
Who pays for a buydown?
Almost always the seller or builder as a concession, not the buyer. In new-construction Florida markets today, builder-paid 2-1 buydowns are one of the most common incentives on the table.
What happens if I refinance or sell during the buydown period?
Unused buydown funds are typically refunded and applied to your principal balance — you don't lose the money.
What to Do Next
Tell us your timeline and expected income trajectory and we'll model a straight fixed rate, a 2-1 buydown, and (where applicable) an ARM side-by-side — including the reset payment — so you can pick the structure that actually fits your plan.