# Fee-Free 1-0 Buydown: A Win-Win for Buyers and Sellers By David Barrett (@davidbarrett) · Published 2026-08-24 Canonical: https://voce.com/@davidbarrett/fee-free-buydown-win-buyers-sellers-5jnijz --- Most buyers assume a mortgage rate buydown requires thousands in upfront seller credits or discount points. The 1-0 temporary buydown — when offered without additional buyer or seller fees — flips that assumption. It knocks 1% off the interest rate for the first 12 months, then resets to the full note rate in Year 2, with no upfront cost to either party. For buyers, that means immediate payment relief without inflating closing costs. For sellers, it opens the door to a faster, cleaner transaction without cutting the asking price. #### Key Takeaways - A 1-0 temporary buydown reduces the interest rate by 1% in Year 1 only, then reverts to the full note rate for Years 2–30. - With a no-fee structure, neither buyer nor seller pays additional upfront costs — the buydown is built into the loan framework without extra charges. - Buyers get lower monthly payments during the critical first year, freeing cash for moving expenses, furnishings, or repairs. - Sellers can offer a meaningful concession — attracting more offers — without reducing the sale price or paying out of pocket. - Borrowers must still qualify at the undiscounted note rate, ensuring the long-term payment remains affordable. ## How Does a No-Fee 1-0 Buydown Work? The mechanics are straightforward. In a standard 1-0 temporary buydown, the interest rate is reduced by 1% for the first year of the loan. On a $350,000 mortgage at a 7% note rate, the borrower pays the equivalent of 6% in Year 1. Starting in Year 2, the payment resets to the full 7% rate for the remaining 29 years. The difference in monthly payment goes into an escrow account at closing — the buydown fund — which the servicer draws from to subsidize the lower payments. With a traditional buydown, that escrow is funded by a seller credit, builder contribution, or buyer-paid points. With a **no-fee structure**, that cost is absorbed by the lender or structured so that no additional cash changes hands at closing beyond normal transaction costs. ![mortgage rate buydown chart](https://convex.voce.com/api/storage/344ec67b-dbe8-4bff-b32f-5f569dbaabbd) As one Barrett Financial Group loan officer explains, in the current market "sellers often fund temporary buydowns as an alternative to price reductions" ([David Barrett](https://www.homeloansbakersfield.com/blog/how-rate-buydowns-work)). The key distinction: the no-fee version does not require the seller to write a check to cover the buydown escrow. ## What Does the 1-0 Buydown Mean for Buyers? For homebuyers in Chandler and across Central Florida, the biggest barrier to entry right now isn't the purchase price — it's the monthly payment. A 1-0 temporary buydown attacks that problem directly. In Year 1, the borrower's rate drops from the full note rate (say, 7%) to 6%. On a $350,000 loan, that's roughly a **$230–$250 reduction in monthly payment** during the first 12 months. That extra $2,800–$3,000 in retained cash over the first year covers real expenses: movers, a new water heater, paint, or just rebuilding the emergency fund after the down payment. And because the no-fee version adds nothing to closing costs, the buyer walks into the home with the same cash they planned to bring. ### Qualifying works the same way Here's an important detail most buyers miss: in any temporary buydown — fee-free or not — lenders underwrite the loan at the **full note rate**, not the reduced buydown rate. As one industry source explains, "for qualification processes, the borrower must qualify at the undiscounted note rate" ([Gershman Mortgage](https://www.gershman.com/loan-programs/temporary-buydown-loans)). That means the buyer's income, debt ratios, and credit profile are tested against the higher payment they'll pay in Year 2 and beyond. The buydown is a payment cushion, not a qualification shortcut. ### Strategic timing matters The 1-0 buydown works best when the buyer expects their income to grow within 12–24 months, or when they anticipate refinancing before reaching the full rate. A borrower who buys at today's rates with a plan to refinance when the market softens essentially gets a built-in lower rate for the time they're most cash-strapped — the first year in the home. ## Why Sellers Should Offer the No-Fee Buydown Sellers hear "buydown" and often picture a large check they have to write at closing. The no-fee 1-0 buydown removes that concern entirely. When a seller offers a traditional 2-1 buydown, the escrow fund typically costs about **2% of the loan amount** — on a $350,000 sale, that's roughly $7,000 in seller-paid credits. The 1-0 version costs significantly less because it covers only one year of rate subsidy. And in the no-fee structure, **the seller doesn't pay that cost at all**. The buydown is structured so that no additional cash concession is required from the seller beyond normal closing costs. The strategic advantage: a listing that advertises a 1-0 temporary buydown (at no cost to the buyer) stands out in a market where buyers are rate-sensitive. More showings, more offers, faster escrow — without touching the listing price. As one Barrett Financial Group loan officer notes, "the economics can work well for both parties: the seller avoids setting a low comparable sale price; the buyer gets below-market payments in the critical first years" ([Dan Ardis](https://www.homeloansbakersfield.com/blog/how-rate-buydowns-work)). ## Is a 1-0 Buydown Right for Your Florida Home? Central Florida's market has its own rhythm. Chandler sits in a competitive corridor where buyers are balancing rising insurance costs, property taxes, and rate-sensitive monthly payments. A no-fee 1-0 buydown is especially useful here because it doesn't load additional costs onto either side in a transaction where margins are already tight. ### When the buyer wins First-time buyers who are stretching to get into their first home benefit most. The first year of ownership is the most expensive — new furniture, minor repairs, utility setup, and the general chaos of moving. Lowering the mortgage payment by $200–$250 a month during that period is real money. ### When the seller wins Sellers in a slower market can use the buydown as a differentiator without conceding price. A buyer comparing two similar homes at the same price point will almost always choose the one offering a buydown — even a one-year buydown — over one that doesn't. The key is making sure the listing agent and buyer's agent understand that **no seller check is required** for this program. ### The one catch to know A borrower who plans to stay in the home for many years will eventually pay the full note rate for 29 out of 30 years. The 1-0 buydown is a first-year bridge, not a permanent discount. If the goal is long-term rate reduction, a permanent buydown (paying discount points) makes more sense — but that does require upfront cash. As noted in the Barrett Financial Group blog, a permanent buydown typically costs 1% of the loan amount to reduce the rate by about 0.25%, with a break-even period of around 5 years. For guidance on whether the 1-0 buydown fits your situation — or to explore a permanent buydown instead — reach out to a local lender who can run the numbers on your specific loan scenario. **Call David Barrett NMLS# 60335 at (813) 498-1616** for more details. Barrett Financial Group LLC | 2701 East Insight Way | Suite 150 | Chandler, AZ 85206 NMLS#181106 | nmlsconsumeraccess.org | Equal Housing Opportunity | Not affiliated with any government agency.