A rate buydown is one of the most powerful affordability tools in today’s market. Buyers, sellers or builders can pay upfront points to temporarily or permanently reduce the interest rate. In NYC, where affordability is tight, buydowns are becoming a common negotiation strategy.

Two Types of Rate Buydowns

1. Temporary Buydowns

These reduce the interest rate for a set period.
Common structures:

• 3-2-1 buydown: rate drops by three percent year one, two percent year two, one percent year three.

• 2-1 buydown: two percent year one, one percent year two.

The buyer benefits from lower payments early while adjusting to homeownership costs.

2. Permanent Buydowns

The borrower pays points upfront to lower the interest rate for the entire loan term.
One point typically equals one percent of the loan amount and reduces the rate by about one quarter of a percent.
(Exact value varies by lender and market.)

Who Pays the Cost

• The buyer

• The seller (common as a negotiating tool)

• A builder on new construction

• Occasionally a lender credit

Why Buydowns Matter in NYC

• They create affordability in early years.

• They help buyers qualify by reducing early payments.

• They allow sellers to offer meaningful concessions without lowering price.

• They protect buyers planning to refinance later.

Buydowns are one of the most flexible levers in a competitive market.

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Joseph Ranola | Five-Star Staten Island & South Brooklyn Realtor® (30 + Google reviews)
Associate Broker · Matias Real Estate | Founder · Bridge & Boro Team
Serving 103xx and 11209 / 11214 / 11228 | $25 M + closed volume
📞 917-716-1496 | ranolarealestate.com