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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.

Dave/Maggie Smith and Julie Jones CRB, SFR, CLHMS Smith and Associates St Petersburg , FL (727) 452-8663 Julie Dave and Maggie Smith, Broker-Associates, bring a wealth of knowledge and experience to the table when working on behalf of their customers. They realize that buying and selling homes involves many important decisions and that you want agents with an excellent reputation who are honest and hardworking and who will communicate and be responsive throughout the entire process. · Sales totaling over $70 Million the past 6 years · RE/MAX Hall of Fame, Chairman's Club, and Platinum Club members · 30+ Years of Combined Experience and CRB, SFR, and CLHMS designations · Top 1% of the 9,000+ member Realtor organization in Pinellas County Prior to partnering with wife, Maggie, in 1995, Dave spent many years as VP and Managing Broker of several top tier real estate offices being honored as "Manager of the Year" repeatedly and earning the admiration and respect of his peers. Dave previously served as Director and Secretary for the St. Petersburg Association of Realtors, two time Secretary of The Greater Clearwater Association of Realtors, Director of the Florida Association of Realtors, Member of FAR Honor Society, Member of Who's Who in Real Estate, and a Member of the Professional Standards Committee. Dave is an excellent problem solver, negotiator, and out-of-the-box thinker when it comes to representing buyers and sellers in the most challenging real estate market in decades. Those who know him, know he has a great sense of humor. He enjoys golf, fishing and tennis. Maggie has been a licensed Realtor since 1983 and earned her broker's license in 1991. Prior to partnering with Dave in 1995, Maggie worked as a real estate agent at a small boutique firm where she specialized in outstanding customer service and satisfaction. Maggie loves showing houses and realizes the importance of being patient and really listening to what customers want and need. She enjoys walking, reading, tennis and cooking. About David Dave and Maggie Smith, Broker-Associates, bring a wealth of knowledge and experience to the table when working on behalf of their customers. They realize that buying and selling homes involves many important decisions and that you want agents with an excellent reputation who are honest and hardworking and who will communicate and be responsive throughout the entire process. · Sales totaling over $70 Million the past 6 years · RE/MAX Hall of Fame, Chairman's Club, and Platinum Club members · 30+ Years of Combined Experience and CRB, SFR, and CLHMS designations · Top 1% of the 9,000+ member Realtor organization in Pinellas County Prior to partnering with wife, Maggie, in 1995, Dave spent many years as VP and Managing Broker of several top tier real estate offices being honored as "Manager of the Year" repeatedly and earning the admiration and respect of his peers. Dave previously served as Director and Secretary for the St. Petersburg Association of Realtors, two time Secretary of The Greater Clearwater Association of Realtors, Director of the Florida Association of Realtors, Member of FAR Honor Society, Member of Who's Who in Real Estate, and a Member of the Professional Standards Committee. Dave is an excellent problem solver, negotiator, and out-of-the-box thinker when it comes to representing buyers and sellers in the most challenging real estate market in decades. Those who know him, know he has a great sense of humor. Dave enjoys golf, fishing and tennis. Maggie has been a licensed Realtor since 1983 and earned her broker's license in 1991. Prior to partnering with Dave in 1995, Maggie worked as a real estate agent at a small boutique firm where she specialized in outstanding customer service and satisfaction. Maggie loves showing houses and realizes the importance of being patient and really listening to what customers want and need. She enjoys walking, reading, tennis and cooking. Contact Me Visit my Website Send a Referral Subscribe to Newsletter