Buydowns

What a temporary buydown is here

A temporary buydown cuts the rate for the first year or two and steps it back up to the note rate. The note rate never changes — the borrower qualifies at it, and the loan amortizes on it. What changes is the payment during the buydown years, funded up front by a lump sum held in escrow. Clarity models the payment path, the escrow cost, and who is paying it.

Add a buydown to a strategy

1. 1

   Open the analysis and go to the loan product you want to buy down.

2. 2

   Turn the buydown on for that product. The structure options appear.

3. 3

   Pick the structure: 3-2-1, 2-1, or 1-0. The first number is how many points the rate is cut in year one.

   

4. 4

   Choose who pays: Seller, Lender, Buyer, or Split 50/50. This drives where the cost lands in the closing-cost picture, not just a label.

   A seller-paid buydown is a seller credit and competes with other concessions in the contract. A lender-paid buydown is priced into the rate. The math differs, so pick the one that matches the deal rather than the one that looks best.

Reading the result

1. 5

   The payment for each buydown year appears alongside the note-rate payment, so the step-up is visible rather than a surprise in year three.

2. 6

   The escrow cost is the total the payer funds at closing. It flows into the closing-cost itemization for the party paying it.

3. 7

   A 2-1 buydown cuts the rate 2% in year one and 1% in year two, then the note rate applies from year three forward. A 1-0 is one year. A 3-2-1 is three.

Show it to the client

A buydown is one of the few structures where the payment changes on a schedule, so the client needs to see the schedule, not just the year-one number. The report renders the buydown module when a strategy has one, showing the payment path year by year.

1. 8

   Publish the analysis as usual.

2. 9

   Check the buydown module in the client's report before you send it, so the step-up year is on the page.