What Is a Rate Buy-Down in NH Real Estate?

🏡 What Is a Rate Buy-Down in NH Real Estate?

With interest rates fluctuating, many New Hampshire homebuyers are turning to rate buy-downs to make their monthly mortgage payments more affordable. A buy-down can temporarily or permanently lower the buyer’s interest rate — creating immediate savings.

Here’s how rate buy-downs work in NH real estate.

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What Is a Rate Buy-Down?

A rate buy-down is when the buyer (or sometimes the seller) pays an upfront fee to the lender to reduce the mortgage interest rate.

The lower rate can be:

✔ Temporary — reduced for the first 1–3 years

✔ Permanent — reduced for the entire life of the loan

Either option lowers the buyer’s monthly payment.

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Types of Rate Buy-Downs in NH

1. Permanent Buy-Down

You pay discount points to reduce the rate permanently.

For example:

1 point = 1% of the loan amount

(Example: 1 point on a $400,000 loan = $4,000)

Even a 0.25%–0.50% rate reduction can create long-term savings.

2. Temporary Buy-Downs

Common options include:

✔ 1-0 Buy-Down: Rate reduced by 1% in year one

✔ 2-1 Buy-Down: Rate reduced by 2% in year one, 1% in year two

✔ 3-2-1 Buy-Down: Rate drops 3% / 2% / 1% over the first three years

Temporary buy-downs are popular for buyers expecting future raises, refinancing, or improved financial stability.

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Who Pays for the Buy-Down?

A rate buy-down can be paid by:

✔ The buyer

✔ The seller (as a seller concession)

✔ The builder (common in new construction)

✔ The lender (in promotional programs)

In a competitive NH market, sellers often use buy-down credits as a negotiation tool.

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Why NH Buyers Choose Rate Buy-Downs

Buy-downs help buyers:

✔ Lower their monthly payment

✔ Improve affordability without dropping the price

✔ Ease into homeownership during the first years

✔ Reduce the impact of higher interest rates

✔ Qualify more easily for certain loan programs

This is especially helpful for buyers in Plymouth, Campton, Thornton, Rumney, and other Central NH towns.

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How Much Does a Buy-Down Cost?

Costs vary depending on:

✔ Loan type

✔ Lender pricing

✔ Market conditions

✔ Whether it’s temporary or permanent

Permanent buy-downs typically cost 1–3 points, while temporary buy-downs vary based on the interest reduction.

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Do Buy-Downs Affect Appraisal?

Not directly — but lender rules still apply.

Seller-funded buy-downs count toward seller concessions, which are capped by loan program.

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Bottom Line

A rate buy-down is a powerful tool in NH real estate that can reduce monthly mortgage payments and improve affordability. Whether temporary or permanent, buy-downs help buyers manage higher interest rates and give sellers a strong alternative to price reductions.

Jim Johnson — Real Estate Agent

58 NH Route 25A

Wentworth, NH 03282

P: (857) 249-7392

W: www.JimJohnsonRealEstateAgent.com

Licensed New Hampshire REALTOR® with Three Hills Real Estate Services

Broker Email: info@ThreeHillsRES.com

Broker Website: www.ThreeHillsRES.com