What Is a Mortgage Rate Buydown and How Does It Work in New Hampshire?

🏡 What Is a Mortgage Rate Buydown and How Does It Work in New Hampshire?

With mortgage rates higher than previous years, many buyers in Plymouth, Campton, Thornton, Rumney, Ashland, and across Central NH are using rate buydowns to lower their monthly payments.

Here’s exactly what a rate buydown is and how it works.

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What Is a Mortgage Rate Buydown?

A rate buydown is when the buyer (or sometimes the seller) pays an upfront fee to temporarily or permanently lower the mortgage interest rate.

This reduces monthly payments, especially in the first years of the loan.

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Types of Rate Buydowns

There are two major types:

1️⃣ Temporary Buydowns (Most Common in NH Right Now)

Temporary buydowns lower your rate for the first few years.

✔ 2-1 Buydown

Year 1: Rate drops by 2%

Year 2: Rate drops by 1%

Year 3+: Normal rate

Example:

If your rate is 7%:

Year 1 = 5%

Year 2 = 6%

Year 3 = 7%

✔ 3-2-1 Buydown

Year 1 = −3%

Year 2 = −2%

Year 3 = −1%

Year 4+ = Full rate

2️⃣ Permanent Buydown

You pay discount points to permanently reduce your rate for the life of the loan.

✔ 1 point = 1% of loan amount

✔ Typically lowers rate by ~0.25% (varies by lender)

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Who Pays for the Buydown?

A buydown can be paid by:

✔ The buyer

✔ The seller (via concessions)

✔ The builder (new construction)

In NH markets like Plymouth, Campton, and Rumney, sellers often offer 2-1 buydowns instead of price cuts.

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Why Buyers Use Rate Buydowns

✔ Lower payments during the first years of homeownership

✔ Helps buyers adjust to their mortgage

✔ Makes homes more affordable in high-rate markets

✔ Lets buyers refinance later without being stretched now

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Pros & Cons

Pros

✔ Immediate payment relief

✔ Helps buyers qualify

✔ Useful in competitive markets

✔ Seller can use it as incentive

Cons

❌ Costs money upfront

❌ Savings depend on staying in the home

❌ Not always ideal if rates drop soon

⭐

Are Buydowns Common in Central NH?

Yes — especially:

In seller-paid incentives

In homes sitting 30+ days

In new construction

In rural areas (Rumney, Dorchester, Warren)

Where buyers need affordability help

❓

Q&A

Q: Can I combine a buydown with a refinance later?

A: Yes — temporary buydowns are designed to bridge the gap until rates drop and refinancing becomes attractive.

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Keywords

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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