3-2-1 Buydown Mortgage: Meaning, Pros and Cons, FAQs

A 3-2-1 buydown mortgage allows homebuyers to secure a lower interest rate for the first three years, with a reduction of 3% in the first year, 2% in the second, and 1% in the third. After this period, the original rate applies for the remainder of the loan. Typically funded by sellers or builders, this option can help buyers manage high mortgage rates. However, borrowers must be cautious about future payment increases and ensure they can afford the higher rates after the buydown period ends.