A 3-2-1 buydown is a seller-paid concession that temporarily reduces a buyer's mortgage interest rate by 3% in year one, 2% in year two, and 1% in year three — then reverts to the full rate. It lowers your initial payments and can help buyers qualify or ease into homeownership.
Watch: What Is a 3-2-1 Buydown?
Beau breaks down this popular financing strategy and explains when it makes sense for Indianapolis buyers.
How a 3-2-1 Buydown Works
Imagine you’re buying a home with a 7% mortgage rate. A 3-2-1 buydown temporarily reduces that rate:
| Year | Rate | Monthly Savings (on $350K loan) |
|---|---|---|
| Year 1 | 4% (7% − 3%) | ~$600/month |
| Year 2 | 5% (7% − 2%) | ~$400/month |
| Year 3 | 6% (7% − 1%) | ~$200/month |
| Year 4+ | 7% (full rate) | — |
Who Benefits Most
A 3-2-1 buydown works best when:
- You expect rates to drop — you plan to refinance before the full rate kicks in
- You need lower payments now — income is expected to grow over the next 3 years
- Sellers are motivated — you can negotiate it as a concession instead of a price cut
- New construction — builders regularly offer buydowns as incentives
Negotiating a Buydown in Indianapolis
Beau Benjamin Realty Group has negotiated seller-funded buydowns for buyers across the Indianapolis metro. In many cases, a seller will choose to fund a buydown rather than reduce the list price — it’s often more tax-efficient for them and more immediately valuable to you.
Ask Beau how to structure your offer to request a 3-2-1 buydown as a seller concession.
Frequently Asked Questions
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