Temporary Buydowns: What Happens to Unused Funds If You Sell or Refinance Early?

A temporary buydown is a great tool to help ease into homeownership with lower initial monthly payments, especially helpful in a high-rate environment. It allows you to enjoy reduced payments in the first one to three years of the loan, offering financial flexibility as you settle into your home.

With a buydown, the upfront cost is used to offset the difference between your actual mortgage payment (based on the full note rate) and the reduced payment you're allowed to make under the buydown terms. That difference is funded by a lump sum, typically paid by the seller, builder, or sometimes the borrower, and held in an escrow account by the lender or servicer.

For example, in a 2-1 buydown, the lender still loans the full amount at the note rate for the entire term of the mortgage. However, for the first year, the borrower makes payments as if the rate were 2% lower, and in the second year, 1% lower. The escrow account makes up the difference between what the borrower pays and what the loan actually requires, ensuring the lender receives the full payment due.

But What If You Sell or Refinance Before the Buydown Period Ends?

Here's the good news: If you sell or refinance the home before the buydown period is over, the unused portion of that escrow fund doesn't disappear, it typically comes back to you.

Since the funds were set aside to reduce your mortgage payments and you're no longer making those payments, the remaining balance in the buydown account is credited back to you at closing. It's your money, or a seller or builder credit given on your behalf, and once it's no longer needed for payment support, it returns to you.

It's always wise to confirm the terms with your lender or loan servicer, but most buydown agreements include this provision.

The Bottom Line

A temporary buydown offers upfront savings and long-term flexibility. And if your plans change, whether you sell or refinance early, you won't lose the benefit of the unused funds. It's just another way this strategy helps you manage your mortgage more efficiently, while keeping more money in your pocket.

Home Insurance: Protect Your Investment

If you're buying a home�or already own one�home insurance might not be the most exciting part of the process. But it is one of the most important.

In many cases, home insurance is required to secure a mortgage, but even if it weren't, having the right coverage in place protects one of your biggest financial investments. It's not just about meeting lender requirements�it's about safeguarding your future.

Protection Against the Unexpected

Home insurance helps you recover financially if disaster strikes. Whether it's a fire, storm, or burglary, insurance can help you repair, rebuild, or replace your home and belongings. Some policies even provide protection if someone gets hurt on your property or if you're faced with a liability lawsuit.

Support During Displacement

If your home becomes temporarily unlivable due to a covered event, insurance can help with additional living expenses, like hotel stays and meals, while repairs are being made. That means one less thing to worry about during a stressful time.

Choosing the Right Coverage

Homeowners can choose policies based on how much coverage they want:

• Actual Cash Value: Pays what your property is worth now, factoring in depreciation.
• Replacement Cost: Covers the cost to replace items with new ones of similar kind and quality.
• Extended or Guaranteed Replacement: Offers a buffer or full coverage to restore your home completely, even if costs exceed the original policy limit.

Knowing your options helps ensure you're covered the way you want to be�not underinsured when it matters most.

A Resource Worth Reading

For a helpful guide, check out the Homebuyers Insurance Handbook, created by the Insurance Information Institute and the National Association of REALTORS�. It walks you through what to look for in a policy and how to determine the right amount of coverage for your situation.

What Does Homeowner's Insurance Typically Cover?

• The structure of your home
• Personal belongings
• Landscaping or property features
• Medical payments for guests
• Liability protection
• Temporary housing expenses

Whether you're closing on your first home or reassessing your current policy, home insurance offers peace of mind, so you're prepared for life's "what ifs." It's not just about protection; it's about confidence in your investment.

Long Term Savings with a Shorter Term Mortgage

When financing a home, the 30-year fixed-rate mortgage is often the go-to option because of its lower monthly payment. But for buyers who can comfortably afford a higher payment, the 15-year mortgage deserves a closer look and may lead to significantly greater financial rewards over time.

Let's compare two scenarios based on a $360,000 mortgage with current rates:

• 30-year mortgage at 6.58%
  Principal and interest: $2,294.42/month
• 15-year mortgage at 5.69%
  Principal and interest: $2,977.92/month

At first glance, the 15-year loan costs about $684 more per month. But when you look at where that money is going, and what it saves you, it starts to make a compelling case.

Interest Savings and Faster Equity Build-Up

The key difference lies in how much of your payment goes toward the principal balance. With the 15-year loan, you pay less interest over time and you pay it off faster.

After 10 years:

• On the 30-year loan, you'd still owe $305,804.
• On the 15-year loan, your balance would be just $155,189 - almost half.

That means you've paid down far more of the loan and built significantly more equity in your home, which increases your financial flexibility and net worth.  Paying an extra $684 per month for 10 years adds up to $82,080, but the 15-year mortgage reduces the loan balance by $150,615 more than the 30-year option, resulting in a net equity gain of nearly $68,535.

Other Long-Term Advantages

• Lower total interest paid: Over the life of the loan, you'll save tens of thousands of dollars.
• Faster path to mortgage-free living: Paying off your home in 15 years frees up your budget sooner and reduces long-term financial stress.
• Equity growth: Greater equity gives you more options for future borrowing, renovations, or downsizing with more cash in hand.

Yes, the 15-year loan requires a higher monthly payment, but if it fits your budget, the long-term benefits are hard to ignore. You'll save substantially on interest, build equity faster, and own your home outright in half the time.

Before locking in a mortgage, run the numbers and talk to your lender. If you can manage the higher payment, the 15-year loan could be one of the best financial moves you make.  We'd be happy to run an analysis for you or go to our 15-yr vs. 30-yr comparison.