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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.

Michael Selvaggio CCIM, CRS, GRI Delaware Homes Real Estate Townsend, DE (302) 584-5590 Licensed in Delaware for over 48 years Mike is a Certified Instructor with the Council of Residential Specialists, an affiliate of the NATIONAL ASSOCIATION OF REALTORS®, and served as the 2008 National President of the Council of Residential Specialists, 2017 National Director, 2018 Regional Vice President, and other positions. He has taught thousands of REALTORS throughout the United States, Italy, Japan, Korea, Canada, Spain, and the Bahamas. He has taught in every state in the U.S. except two. Selvaggio was named REALTOR of the Year in 1990 for the state of Delaware. In 2023 he was named CRS of the Year for his region. He has served as President of the Delaware Association of REALTORS and President of his local board. Mike has been published internationally and continues to write articles and instructional DVD and CDs. Selvaggio opened his own real estate company, Delaware Homes, in 2007 and now has three locations serving all of Delaware. He has been a REALTOR® in Delaware since 1976. Contact Me Visit my Website Send a Referral Subscribe to Newsletter