A 2-1 buydown lowers your rate for the first two years, then the full note rate applies for the rest of the loan, and those two cheap years get paid for up front. That answers the too-good-to-be-true question: someone funds the subsidy, usually a seller credit, or you accept a slightly higher permanent rate to cover it. The mechanics, with an illustrative (not current-market) 7% note rate: year one you pay as if the rate were 5%, year two as if it were 6%, and from year three on you pay the real 7%. Buyers generally cannot just fund the buydown out of pocket; the alternative is negotiating a lower purchase price instead. The subsidy sits in an escrow account and draws down monthly, and if you refinance before the two years run out, the unused balance credits back against your payoff. Points paid on a permanent buydown, by contrast, are gone the moment you spend them. The guardrail: you must qualify at the full note rate, not the reduced start rate, which keeps you from buying a payment you cannot actually carry. Where it fits: you expect income to rise, or you need payment relief for a known window (parental leave, say). If the plan quietly depends on refinancing before year three, be careful. Treat a future refinance as a bonus, never the plan. The structure is available on FHA, VA, and conventional loans; jumbo lenders tend to be more restrictive. The real question is always who pays for it and what else that money could do, since a straight price cut often competes well. That side-by-side is exactly what we run on the free Roadmap conversation.