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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.

Patricia LaFosse Realtor RE/MAX Champions West Covina, CA (626) 233-5089 0989980 Patricia LaFosse has over 30 years of combined experience in the Real Estate Industry. She is an award-winning Realtor year after year and is always looking to stay at the top of her game with continued education to specialize in meeting the needs of various types of clients. Whether you are a First-Time Homebuyer, Move-up buyer, Downsizer, Seller or just looking to exit the real estate market, she uses her experience, education, strong negotiating and communication skills, to ensure a profitable, and stress-free transaction. She is committed to building strong, long-term client relationships and maintaining repeat and referral business. Patricia and The LaFosse Team is a name you can trust to partner for all your real estate needs. We are bilingual in English/Spanish/Mandarin and use top of the line marketing skills and technology to provide exceptional service. Visit my Website Send a Referral