What Is a 1/0 Buydown and How Can It Help Homebuyers in Today’s Market?

A 1-0 buydown will lower your monthly payment each month during the first year of the loan.

In a market where interest rates can feel like a moving target, homebuyers are looking for smart ways to make their monthly payments more manageable. One popular strategy gaining traction is the 1/0 buydown. But what exactly is it, how does it work, and how does it compare to a 2/1 buydown?

What Is a 1/0 Buydown?

A 1/0 buydown is a temporary interest rate reduction offered by the lender, typically paid for by the seller or builder as a concession. In this structure, the buyer gets a 1% lower interest rate for the first year of the mortgage, before the rate adjusts to the full note rate in year two and stays there for the remainder of the loan term.

For example:

• Loan amount: $400,000

• Note rate: 6.5%

• First-year rate with 1/0 buydown: 5.5%

• After year one: back to 6.5% for the rest of the loan

How Does a 1/0 Buydown Work?

The buydown is funded through a lump sum paid upfront, usually by the seller, builder, or lender. That money is used to subsidize the borrower’s payments in year one. The buyer still qualifies based on the full note rate, ensuring they can afford the mortgage once the buydown period ends.

This strategy helps ease the transition into homeownership by lowering payments during the first year—when budgets are often tight due to moving costs, new furniture, or renovations.

1/0 Buydown vs. 2/1 Buydown: Which Is Better?

A 2/1 buydown lowers the rate by 2% the first year and 1% the second year, offering bigger short-term savings but requiring a higher upfront cost.

Here’s how they compare:

Feature	1/0 Buydown	2/1 Buydown
Duration	1 year	2 years
Rate reduction	-1% first year	-2% first year, -1% second year
Upfront cost (approx.)	~0.75% of loan amount	~2.0–2.25% of loan amount
Good for…	Modest payment relief	Bigger early savings

Example: On a $400,000 loan, a 1/0 buydown may cost around $3,000, while a 2/1 buydown may cost around $8,000–$9,000.

A 1/0 buydown can be a great middle-ground option: it costs less than a 2/1 buydown but still provides meaningful short-term relief—especially in a market where buyers are sensitive to affordability.

Final Thoughts

If you’re buying a home and negotiating with a seller willing to offer concessions, a 1/0 buydown can be a smart and simple way to reduce your initial mortgage payments. It’s especially appealing when you expect to earn more later, refinance, or simply want a little breathing room in year one.

How I Can Help You

When it comes time to purchase a home, I want to help you! Hopefully articles like this give you good information and a better understanding of the mortgage world but let me use my experience and expertise to help you with your particular situation.

I tell my clients and referral partners that a mortgage transaction starts with a simple conversation. Let’s talk about your financial situation, budget, and goals so that I can help you determine the best solution for you. During a 10-minute informal conversation, we can get you on the right path as it relates to a home purchase or mortgage refinance.