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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.

Larry Bell CRB, CRS, SRES, ABR, SFR John L Scott Real Estate Everett, WA (425) 359-4041 12094 Larry has over five decades of experience in the real estate industry, with a strong foundational background in new construction, design, development, financing, and sales management. Since 1974, he has focused on residential sales and listings, managing and training hundreds of agents and growing branch offices throughout every economic climate. Larry has developed in-depth market knowledge that all his clients benefit from. In 1992, Larry owned and operated a successful real estate franchise that maintained the title of top 10% personal production nationwide. Since 2019, Larry has been solely committed to representing home-buying and selling clients at John L. Scott Real Estate in Everett as a managing broker. Larry's commitment to continuing education and expanding his professional accreditations demonstrates his focus on providing the highest, professional service for his clients. He holds numerous accreditations, including: -CRB Certified Residential Broker -CRS Certified Residential Specialist -ABR Accredited Buyer Representative -SRES Senior Real Estate Residential Specialist -SFR Short Sale and Foreclosure Resource Additionally, Larry is an active member of: -National Association of Realtors -Washington State Realtor Association -Snohomish-Camano Board of Realtors He and Judy, his wife are a proud family. They share four sons, eight grandkids, and five great-grandkids. Larry is prepared to help you succeed in your real estate endeavors and welcomes the opportunity to help you with your real estate future! Contact Me Visit my Website Send a Referral Subscribe to Newsletter