Builder Rate Buydowns vs Resale: How to Compare in NC

Caul Group Residential, brokered by eXp Realty

A builder rate buydown can lower your mortgage payment, sometimes only for the first few years. To compare a new build with a buydown against a resale home, get two Loan Estimates for the same loan type and add up the total cost over the years you expect to keep the loan.

For context, Freddie Mac's survey put the average 30-year fixed rate at 7.24% as of October 29, 2026. Here is how buydowns work, who pays for them, and how to compare offers fairly. This is general information. Talk to a loan officer or a HUD-approved housing counselor about your own loan.

What a rate buydown is

A buydown is money paid up front to lower the interest rate on a loan. Someone pays the lender, and you get a lower rate or payment. There are two main kinds.

Temporary buydown

A temporary buydown lowers your rate for a set time, usually 1 to 3 years, says the CFPB. Then your payment goes up each year until it reaches the full rate on your note.

Common types, per the VA:

• 2-1 buydown: your rate is 2 points lower in year 1, 1 point lower in year 2, then the full rate from year 3 on.
• 3-2-1 buydown: 3 points lower in year 1, 2 lower in year 2, 1 lower in year 3, then the full rate.

The buydown money sits in an account and covers the gap each month. Your note, the loan contract, shows the full rate from day one.

Permanent buydown

A permanent buydown uses discount points. The CFPB says one point costs 1% of the loan amount and lowers your rate for the whole life of the loan. Points show up on page 2 of your Loan Estimate, in Section A.

Who pays for a buydown

The VA says a buydown can be paid by the builder, the seller, the lender or the buyer. In new construction, a builder may offer to pay for one as an incentive. A resale seller can also pay for a buydown, or give you a seller credit toward closing costs.

Seller and builder money counts toward the limits on seller help for your loan type. Your loan officer can tell you how much is allowed.

What happens when a temporary buydown ends

Your payment goes up to the full amount. It will not go back down unless you refinance or pay down the loan. Refinancing is never a sure thing, since it depends on future rates, your credit and your home's value.

Lenders know this. Fannie Mae and the VA both say lenders qualify you based on the full rate, not the lower first-year rate. Still, make sure the full payment fits your budget before you sign.

If you sell or pay off the loan early, Fannie Mae's guide says unused buydown money is handled under the written buydown agreement. Read it.

How to compare a buydown with a resale home

The lowest first-year payment does not always mean the lowest total cost. Use these steps.

1. Use the same loan type

Compare a 30-year fixed with a 30-year fixed, FHA with FHA, and so on. The CFPB says to ask for Loan Estimates for the same kind of loan.

2. Get two Loan Estimates

Ask for one Loan Estimate for the new build with the buydown, and one for the resale home (or the same home without the buydown). Look at:

• Note rate: the rate after any temporary buydown ends.
• Monthly payment: in year 1, year 2 and after the buydown ends.
• Points and lender credits: points are in Section A on page 2. Lender credits are in Section J and usually mean a higher rate.
• APR: the CFPB says APR can help you compare costs.
• Estimated Cash to Close: this includes any seller credits.

3. Add up the cost over your time in the home

The CFPB suggests asking your loan officer for the total cost over the shortest, longest and most likely time you will keep the loan. A temporary buydown helps most in the first years. A permanent buydown helps more the longer you keep the loan.

4. Compare the whole deal, not only the rate

Look at the price, closing costs, property taxes and insurance on each Loan Estimate. Ask what else you could get instead of the buydown, such as a lower price or a credit toward closing costs. A resale seller may agree to the same kind of credit.

5. Get every incentive in writing

Ask whether the builder's offer depends on using a certain lender or closing by a certain date. Make sure the incentive is written into your contract.

Frequently asked questions

What is a 2-1 buydown?

A temporary buydown where your rate is 2 points lower in the first year, 1 point lower in the second year, and then goes to the full note rate for the rest of the loan.

Is a builder buydown better than a lower price?

It depends on how long you keep the loan and what each option costs over that time. Compare two Loan Estimates for the same loan type.

Can a resale seller pay for a rate buydown?

Yes. The VA says a seller can pay for a buydown, and a resale seller can also give a credit toward closing costs. Both count toward your loan's limits on seller help.

What happens to my payment when the buydown ends?

It goes up to the full payment on your note. Lenders qualify you at that full payment, so plan for it from the start.

What is the difference between a temporary and a permanent buydown?

A temporary buydown lowers the rate for 1 to 3 years. A permanent buydown uses discount points to lower the rate for the life of the loan.

What are mortgage rates right now?

Freddie Mac's survey put the average 30-year fixed rate at 7.24% and the 15-year at 6.60% as of October 29, 2026. Your rate depends on your loan and your credit.

Comparing a new build and a resale home?

Our founder, Tina Caul, has been in real estate since 2001. If you are weighing a new build against a resale home, we can help you line up the offers side by side. For loan questions, talk to your loan officer.

• See how we help buyers
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• Contact us or call (919) 263-7653

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