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Temporary Buydowns: What Happens to Unused Funds If You Sell or Refinance Early? - 9/17/2025

A temporary buydown is a great tool to help ease into homeownership with lower initial monthly payments, especially helpful in a high-rate environment. It allows you to enjoy reduced payments in the first one to three years of the loan, offering financial flexibility as you settle into your home.

With a buydown, the upfront cost is used to offset the difference between your actual mortgage payment (based on the full note rate) and the reduced payment you're allowed to make under the buydown terms. That difference is funded by a lump sum, typically paid by the seller, builder, or sometimes the borrower, and held in an escrow account by the lender or servicer.

For example, in a 2-1 buydown, the lender still loans the full amount at the note rate for the entire term of the mortgage. However, for the first year, the borrower makes payments as if the rate were 2% lower, and in the second year, 1% lower. The escrow account makes up the difference between what the borrower pays and what the loan actually requires, ensuring the lender receives the full payment due.

But What If You Sell or Refinance Before the Buydown Period Ends?

Here's the good news: If you sell or refinance the home before the buydown period is over, the unused portion of that escrow fund doesn't disappear, it typically comes back to you.

Since the funds were set aside to reduce your mortgage payments and you're no longer making those payments, the remaining balance in the buydown account is credited back to you at closing. It's your money, or a seller or builder credit given on your behalf, and once it's no longer needed for payment support, it returns to you.

It's always wise to confirm the terms with your lender or loan servicer, but most buydown agreements include this provision.

The Bottom Line

A temporary buydown offers upfront savings and long-term flexibility. And if your plans change, whether you sell or refinance early, you won't lose the benefit of the unused funds. It's just another way this strategy helps you manage your mortgage more efficiently, while keeping more money in your pocket.

Amanda Robins C2EX, AHWD, CPS Keebaugh and Company Longview, TX (903) 445-6940 647221 I am proud to be a part of a select group of real estate professionals at Keebaugh and Company, where I can serve all of your real estate needs. As a Broker Associate, a member of the National Association of Realtors and Texas Realtors, I believe in and uphold a strict Code of Ethics. As a tech savvy agent who is ready to provide you with the advantage you deserve, your satisfaction is my priority. Buying or selling real estate is the biggest transaction most people will undertake in their life, and it should not be taken lightly. If you are looking for someone who can offer personalized care with integrity to provide results you can count on, it would be my pleasure to assist you. My goal is to remain committed to providing excellent and comprehensive service. Because buying or selling a home is a major financial commitment and lifestyle decision, you should select a real estate sales agent that has a proven reputation for excellence. I am a consistent multi-million-dollar top-producing agent with the knowledge and expertise that hundreds of training hours afford. Guiding clients toward a successful sale requires attention to detail, communication, consistent follow through and efficiency. Personal: I am married to Larry, we have 2 daughters, and our home cheers on the Spring Hill Panthers. I am a transplant from the DFW metroplex but have made East Texas my home since 2005. Community Involvement: My job would be so difficult without the trust and confidence of members of my community. Therefore, I believe in reciprocating that support by giving back to our local community. Our whole family serves in various programs at our church. I am a member of the Spring Hill ISD PTA, serve as a room mom and volunteer at the Intermediate campus. I am a Photography Assistant for Now I Lay Me Down To Sleep, which provides remembrance photography to parents suffering the loss of a baby. I also serve on the Longview Area Association of Realtor’s Board of Directors, currently serving as Vice-Chair; I chair the association’s MLS Committee and sit on the Texas Realtors’ Professional Standards Committee. Contact Me Visit my Website Send a Referral Subscribe to Newsletter