Is a 2-1 Buydown Still a Smart Move in 2025?

The 2-1 buydown strategy was the talk of the mortgage world in 2023 and 2024—and for good reason. It offered homebuyers a way to ease into higher interest rates while keeping monthly payments more manageable in the early years of homeownership.

But here in 2025, with a shifting housing market and continued uncertainty around long-term rates, many buyers in the Coachella Valley are asking: Is a 2-1 buydown still a smart move?

At MortgageWorks, we believe the answer is yes—for the right buyer and the right situation. Let’s break down what’s changed, how buydowns stack up against other strategies, and how to tell if this option makes sense for your next home loan.

What Is a 2-1 Buydown?

A 2-1 buydown is a temporary interest rate reduction that lowers your monthly mortgage payment for the first two years of your loan. In year one, your interest rate is reduced by 2%. In year two, it’s reduced by 1%. In year three and beyond, the rate returns to the full note rate for the rest of the loan term.

For example, if your locked rate is 7%, your rate would be:

5% in year one

6% in year two

7% starting year three

These buydowns are often paid for by the seller or builder as a buyer incentive and are commonly available with FHA, VA, and conventional loans.

Why Were 2-1 Buydowns So Popular?

During the sharp rate increases of 2022 and 2023, many buyers were pushed to the edge of affordability. A 2-1 buydown helped ease that pressure and gave buyers room to adjust—especially if they were planning to refinance when rates dropped.

In hot real estate markets like Palm Springs, La Quinta, and Palm Desert, buydowns were often the key to helping first-time buyers or upsizing families stay within budget.

Are They Still Worth It in 2025?

With the market shifting again and interest rates showing signs of stabilizing, some wonder if the 2-1 buydown is still relevant. At MortgageWorks, we believe it can still be a smart move—especially in these situations:

You’re buying a home now but expect rates to fall and want the flexibility to refinance later.

You want to ease into higher payments, perhaps while transitioning jobs, relocating, or adjusting to a new cost of living.

You’re buying in a negotiable market, where the seller may be willing to pay for the buydown to close the deal.

For many buyers in the Coachella Valley, these situations are still very real in 2025.

How It Compares to Other Strategies

2-1 Buydown vs. Rate Lock

A rate lock secures your interest rate while you’re closing your loan, but it doesn’t reduce your initial payments. A 2-1 buydown includes a rate lock and adds an affordability cushion for the first two years. If you want both stability and breathing room, a 2-1 buydown can be the better choice.

2-1 Buydown vs. Adjustable-Rate Mortgage (ARM)

An ARM also starts with a lower rate—but the difference is it adjusts after the initial fixed period, often every year. With a 2-1 buydown, your rate is fixed after year three. This makes it a more stable option for buyers who don’t want surprises down the road.

2-1 Buydown vs. Immediate Refinance

Some buyers hope to refinance quickly after closing, but that depends on market conditions and lender requirements. A 2-1 buydown gives you time to wait for the right moment to refinance without being locked into today’s full rate right away.

Real Example: A Buyer in Indio

A family in Indio recently purchased a $475,000 home using a 2-1 buydown offered by the seller. Their locked rate was 6.75%, but with the buydown, they paid 4.75% in the first year and 5.75% in the second. This saved them over $7,000 in the first 24 months—money they used to furnish the home and build emergency savings. They plan to refinance when rates reach 5.5% or below.

When a 2-1 Buydown Might Not Be the Best Choice

A 2-1 buydown is less ideal if:

You plan to sell the home in under three years

The seller isn’t offering to cover the buydown

You need the lowest possible long-term payment, rather than a short-term reduction

In those cases, exploring an ARM or permanent rate buydown may be better. Our team at MortgageWorks can walk you through the numbers and show you all the options side by side.

The Bottom Line

In 2025, the 2-1 buydown remains a flexible and strategic tool in the right situation. For buyers in Palm Desert, Rancho Mirage, and surrounding Coachella Valley communities, it’s a smart way to get into the home you want now—without committing to today’s full mortgage payment right away.

Ready to Run the Numbers?

Let’s explore whether a 2-1 buydown makes sense for your next home. At MortgageWorks, we’ll help you compare all your options and build a loan strategy that fits your timeline and budget.

Call Art Alvarez today—your answers are on the house. 760-969-5023

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.