What Is a 1-0 Buydown?

A 1-0 buydown is a temporary interest rate reduction that applies only to the first year of your mortgage. During year one, your rate is one percentage point lower than your note rate, which is the rate stated on your loan. Starting in year two, your rate returns to the note rate and stays there for the rest of the term. It doesn’t permanently change your interest rate. It simply gives you a lower payment for the first twelve months.

How the Payment Changes

Here’s a hypothetical example. It assumes a $300,000 loan on a 30-year fixed mortgage with a 6.5% note rate and shows principal and interest only (not taxes, insurance, or mortgage insurance).

In this example, your payment is about $193 lower each month in year one, which adds up to roughly $2,300 over the year. After that, the payment steps up to the full amount. These numbers are for illustration only and are not a rate quote. Actual rates and payments will vary.

Where Does the Money Come From?

A temporary buydown isn’t free. Funds to cover the difference between your reduced payment and the full payment are set aside at closing, and they’re used to subsidize your payments during the first year. Depending on the transaction, the funds may come from:

• The seller, through a negotiated concession
• A builder, as a new construction incentive
• The buyer
• Another eligible source, depending on program rules

Because a 1-0 buydown covers just one year and a one-point reduction, the upfront cost is generally smaller than for longer buydown structures. That can make it easier for a seller, builder, or buyer to fund. Paulo and Alex can help you review the costs and who may be able to contribute.

Why Choose a 1-0 Buydown?

A Lower Upfront Cost

Compared with deeper buydowns, a 1-0 structure usually requires less funding, which can make it more practical in some deals.

Relief During the Most Expensive Year

Lower payments can help cover moving expenses, furniture, and early repairs.

A Short Adjustment Window

You only need to plan for one step up in payment, which is simple to understand and prepare for.

A Possible Negotiating Tool

Buyers sometimes ask a seller for a buydown contribution instead of a price reduction, depending on the market and the deal.

A Fixed-Rate Foundation

You still have a fixed-rate mortgage, and the buydown simply adds a temporary reduction at the start.

1-0 vs. 2-1 vs. 3-2-1 Buydowns

All three are temporary reductions, but they differ in size and length:

• 1-0 buydown: One point lower in year one only. The smallest and shortest option, with the lowest funding requirement.
• 2-1 buydown: Two points lower in year one and one point lower in year two, offering a middle level of relief.
• 3-2-1 buydown: Three, two, and one point lower across the first three years, offering the longest and largest relief at the highest upfront cost.

Paulo and Alex can compare all three using your numbers. You can also try the buydown calculator.

Important Things to Consider

• It’s temporary. In year two, you’ll pay the full note-rate payment.
• Plan for the full payment. Make sure the regular payment fits your long-term budget.
• Your note rate may be higher than on a loan without a buydown, depending on how the deal is structured.
• Availability varies. Eligibility depends on the loan program, lender, and property.
• Selling or refinancing early may affect remaining buydown funds, depending on the terms.

A Buydown vs. Paying Points

A buydown lowers your payment for a limited time. Paying discount points, on the other hand, can lower your rate for the entire loan. Which is better depends on how long you expect to keep the loan and how you’d like to use your cash. The “should I buy points?” calculator can help you compare, and Paulo and Alex can walk through the numbers with you.

Who May Benefit From a 1-0 Buydown?

This option may be worth considering if you:

• Want a little extra breathing room in the first year
• Are negotiating with a seller or builder who may offer a modest concession
• Expect your finances to be steady and want a simple, short-term strategy
• Plan to stay in your home beyond the first year
• Can comfortably handle the full payment starting in year two

Loan Programs to Pair With a Buydown

Buydown availability depends on the loan program and lender guidelines. Paulo and Alex can review options such as conventional loans, FHA loans, and VA loans. If you need help with upfront costs, ask about down payment assistance. Use the home affordability calculator and check today’s rates as you plan.

The Process, Step by Step

1. Consultation: Share your goals and budget with Paulo or Alex.
2. Compare options: Review payment schedules, costs, and alternatives.
3. Negotiate: Discuss possible seller or builder contributions with your agent.
4. Application and documents: Submit your financial information.
5. Underwriting and appraisal: Your file and property are reviewed.
6. Closing: Finalize your loan and buydown funds.

Why Work With Paulo Maria and Alex Maria?

A buydown works best when you understand every number. Paulo Maria (NMLS #1372655) and Alex Maria (NMLS #2120289) with Barrett Financial Group (Company NMLS #181106) provide clear explanations, honest comparisons, and a wide range of loan programs, so you can decide whether a 1-0 buydown fits your plans.

Ready to Explore a 1-0 Buydown?

Contact Paulo Maria at (702) 219-8214 or Alex Maria at (702) 713-0536, or visit 8485 W Sunset Rd, Suite 202, Las Vegas, NV 89113, to discuss your options.

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