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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.

Martha May ASP, CRS, GRI, SFR Berkshire Hathaway HomeServices Chicago Glenview, IL My success story started in 1986, and I still love what I do! I am in the top 7% of the company year after year, for decades finishing in the #1 spot! I am proud to say I am a member of the esteemed BHHS Chicago Hall of Fame, the National Gold Chairman’s Circle, and President’s Circle! My record speaks for itself, and I get results! One of the reasons I am among the most successful Realtors in the North Shore area is that I take my business and my clients to heart. I pride myself in being a “what you see is what you get” person. Because of that, I believe you deserve not only my best effort but also an up-front opinion of your transaction. Homeowners appreciate it when I stay in touch. It is about being personable and professional. I know that selling or buying a home is one of the biggest decisions you will ever make. It is much more than just another deal. It is a life-altering decision. I will give you 200% in doing everything I can to make your move, and all that entails, as effortless as possible! Contact Me Visit my Website Send a Referral Subscribe to Newsletter