Are you seeing builder ads that promise to “buy down your rate” and wondering what that really means for your monthly payment in Tampa? You are not alone. When you are comparing offers across multiple new communities, the numbers can get confusing fast. This guide breaks down how temporary and permanent buydowns work, how to compare them side by side, and what to watch for in Hillsborough County so you can choose the offer that actually benefits you. Let’s dive in.
Buydown basics
A buydown is an upfront subsidy that lowers your mortgage interest rate either for a short window or for the life of the loan. The funds are usually paid by the builder, and for temporary buydowns they are often placed in escrow to cover the difference between the reduced payment and the contract payment.
Temporary buydowns (2-1, 1-0, 1-1)
- With a 2-1 buydown, your rate is reduced by 2% in year 1 and 1% in year 2, then returns to the note rate in year 3 and beyond.
- Smaller versions like 1-0 or 1-1 follow the same pattern with smaller reductions.
- These can make the first two years more affordable, which can help if you plan to refinance or sell within that period.
Permanent buydowns (discount points)
- A permanent buydown lowers your rate for the life of the loan using discount points paid at closing.
- Each point typically costs about 1% of the loan amount and reduces the rate by an amount that varies with the market. The exact impact depends on lender pricing at the time.
- Builders sometimes pay points on your behalf, but the benefit depends on the offer’s structure and total price.
How to compare offers in Tampa
When two or more builders pitch incentives, focus on the full picture, not just the headline rate.
Step-by-step: apples-to-apples
- Gather complete details from each builder:
- Base price, lot premium, included vs optional upgrades, and any closing-cost credits.
- Exact buydown terms: type (2-1 vs permanent), who pays, dollar amount or points, and whether you must use a preferred lender.
- HOA dues, initiation fees, and any amenity credits.
- Set your comparison loan scenario:
- Purchase price and down payment to determine the loan amount.
- Term (often 30-year fixed).
- The buydown rates for years 1–2 and the long-term note rate.
- Total your cash flows:
- Calculate the monthly payment at the reduced buydown rates for the months they apply, and at the note rate after that.
- Compare your total paid with a buydown vs without a buydown over the relevant period.
- Adjust for any builder trade-off, such as a higher base price used to fund the incentive.
- Consider your time horizon:
- If you plan to sell or refinance within 2 years, the front-loaded savings from a temporary buydown can be valuable.
- If you plan to stay long term, weigh a permanent rate reduction or even a price cut more heavily.
Simple example with hypothetical numbers
This example is for illustration only. Use your actual loan estimates to run your numbers.
- Home price: $500,000
- Down payment: 10%
- Loan amount: $450,000
- Term: 30-year fixed
- Note rate: 6.5%
- 2-1 buydown: pay 4.5% in year 1, 5.5% in year 2, then 6.5% after
Approximate principal-and-interest payments per month:
- At 6.5%: about $2,844
- At 5.5%: about $2,556
- At 4.5%: about $2,282
Estimated savings vs the 6.5% payment:
- Year 1: $2,844 − $2,282 ≈ $562 per month, about $6,744 total
- Year 2: $2,844 − $2,556 ≈ $288 per month, about $3,456 total
- Two-year total savings ≈ $10,200
If a builder raises the home’s base price by $10,000 to fund the buydown, your break-even is roughly month 23. After that point, the 2-1 buydown would have “paid for” the increase.
Permanent buydown comparison (hypothetical):
- Suppose 2 discount points reduce the note rate from 6.5% to 6.0%.
- Points cost on $450,000 = 2% = $9,000.
- Payment at 6.0% ≈ $2,700, saving about $144 per month vs 6.5%.
- Simple payback if you paid the points: $9,000 ÷ $144 ≈ 63 months (a bit over 5 years).
- If the builder pays the points, confirm whether the base price increases and use that figure in your payback math.
Qualification and underwriting
Lenders treat buydowns differently. Confirm these points early in writing:
- Which payment counts for qualification? Some lenders qualify you using the full note rate, while others allow the reduced buydown payment if the subsidy is documented and escrowed.
- DTI impact. Qualifying with the lower payment can improve your debt-to-income ratio and buying power, but only if the lender allows it.
- Loan program rules. Conventional, FHA, VA, and USDA each have their own guidelines for seller-paid buydowns and underwriting. Ask your lender how they handle third-party buydowns and what documentation they require.
Don’t forget taxes, insurance, HOA, and PMI
A buydown affects only the interest portion of your mortgage payment. Your full monthly housing cost may include:
- Property taxes and homeowner’s insurance.
- HOA dues and any initiation fees.
- Private mortgage insurance if your down payment is under 20% on a conventional loan.
Include these items in your comparison, especially when you see low teaser payments in advertisements.
Tampa-specific factors to weigh
Property taxes and homestead
Florida primary residents may be eligible for a homestead exemption that reduces taxable assessed value. This affects your escrowed tax payment. Review timing and eligibility with the Hillsborough County Property Appraiser and factor the estimate into your monthly cost.
Flood zones and flood insurance
Parts of Tampa include low-lying and coastal areas where flood insurance may be required. If your lot is in a flood zone, estimate flood insurance along with homeowner’s insurance when you compare offers.
HOA dues and amenities
Many new communities in Hillsborough County include HOAs with meaningful monthly or annual fees. Builders may advertise low mortgage payments through a buydown, but HOA assessments still apply and can change over time. Include dues and any initiation fees in your total cost.
Resale and pricing trade-offs
If you plan to stay long term, a permanent rate reduction or a lower purchase price can be more valuable than a temporary buydown. If your horizon is shorter, the front-loaded savings of a temporary buydown may fit better. Weigh this against neighborhood-specific resale dynamics.
Common trade-offs Tampa buyers see
- Higher price vs. “free” buydown. Some builders raise the base price or charge for certain upgrades to fund incentives. Compare the net price and finishes, not just the rate.
- Preferred-lender requirement. Incentives may require using a builder’s lender. This can streamline processing but limits your ability to shop rates and fees. Always compare full loan estimates.
- Time-limited promos. Short deadlines can pressure quick decisions. Confirm you can lock the rate and still choose the lot and options that meet your needs.
- Appraisal risk. If the price is increased to fund incentives and the appraisal comes in low, you may need to renegotiate or bring the difference to closing.
Quick comparison template
Use this checklist to keep every offer on the same footing:
- Monthly cost in year 1 and year 2: principal and interest at the buydown rates, plus estimated taxes, insurance, HOA, and PMI if applicable.
- Long-term cost from year 3 onward: principal and interest at the note rate, plus taxes, insurance, HOA, and PMI.
- Net incentive math: builder incentive value minus any increased cost, such as a higher base price or added fees.
- Break-even months: how many months of savings are needed to offset a higher price.
- Qualification impact: your DTI with and without the buydown payment, based on the lender’s underwriting approach.
- Strings attached: preferred-lender requirement, expiration dates, and appraisal considerations.
How OneAgent Realty helps you compare
A clear comparison can save you thousands and prevent surprises at underwriting. We help you request the right documents from builders and lenders, run side-by-side payment scenarios, and factor in Tampa-specific items like taxes, HOAs, flood insurance, and appraisal risks. If you are choosing between a temporary buydown, permanent buydown, or a price reduction, we will help you match the offer to your time horizon and goals.
Ready to put real numbers to your short list of communities? Connect with the team at OneAgent Realty for a focused, data-backed comparison and next steps.
FAQs
What is a 2-1 buydown on a Tampa new-construction home?
- It is a temporary subsidy that lowers your interest rate by 2% in year 1 and 1% in year 2 before returning to the full note rate in year 3 and beyond.
How do I compare a builder buydown vs. a price cut?
- Calculate your total payments during the buydown period, subtract any higher base price, estimate break-even months, and weigh that against the long-term benefit of a lower price.
Will a temporary buydown help me qualify for a mortgage?
- It depends on the lender; some qualify you at the note rate, while others may allow the reduced buydown payment if the subsidy is documented and escrowed.
Do buydowns change PMI or homeowners insurance costs?
- No; buydowns affect only the interest portion of your mortgage, while PMI, taxes, and insurance are separate and should be included in your total monthly cost.
How do Hillsborough County taxes and the homestead exemption affect payments?
- Property taxes are part of your escrowed payment, and homestead benefits for primary residences can reduce taxable assessed value; include these estimates in your comparison.
What if the appraisal comes in low when an incentive increased the price?
- You may need to renegotiate price, adjust incentives, or bring additional funds to closing if the appraisal does not support the contract price.
