Eyeing a new Seaport condo but uneasy about today’s mortgage rates? You are not alone. Many buyers across the South Boston Waterfront are seeing offers for “2-1 buydowns,” closing credits, or preferred-lender promos and wondering what actually makes sense. In this guide, you will learn how temporary and permanent buydowns work, what developers in Seaport typically offer, and how to compare a buydown with a straight price reduction. Let’s dive in.
Rate buydown basics
A mortgage rate buydown uses upfront funds to reduce your interest rate for a set period or for the life of the loan. The funds can come from you, the seller or developer, or the lender. The lender applies those funds to lower your payments according to the structure you choose.
Temporary buydowns
- A common format is a 2-1 buydown. Your rate is reduced by 2 percentage points in year one and 1 percentage point in year two. In year three, the rate returns to the original note rate.
- Goal: lower your early payments while you settle in, wait for income changes, or watch for a future refinance window.
- Important: a temporary buydown lowers your payment in the first years only. It does not change the note rate that governs your loan for the long term once the buydown ends.
Permanent buydowns
- You or the seller pay discount points at closing to reduce the note rate for the entire loan term. One point usually equals 1 percent of the loan amount.
- The amount your rate drops per point depends on current market pricing and lender rules.
- Because the note rate is lower for the life of the loan, a permanent buydown reduces total interest paid over time.
How funds are delivered
- In new construction, a developer or lender often funds a temporary buydown as an incentive. Funds are set aside with the lender and drawn each month to subsidize the payment.
- Buyer-paid points are collected at closing. Lender or builder credits can be applied to closing costs and, in some cases, to buydowns.
Why Seaport developers use buydowns
Seaport is a high-end, new-construction condo market where developers care about preserving list prices and recorded comparables. In that setting, a buydown can improve your effective affordability without lowering published sale prices.
Here is why developers often prefer buydowns over price cuts in Seaport:
- They preserve list price and comps that support future closings within the building.
- They highlight short-term affordability in marketing without changing long-term revenue per unit.
- They avoid repricing dynamics that can ripple through a development.
In slower moments or when rates dominate buyer concerns, you will often see temporary buydowns featured alongside other incentives.
Common incentives in Seaport buildings
What you may find when touring new Seaport developments:
- Temporary 2-1 buydown funded by the developer or paired lender for the first two years.
- Lump-sum seller credit that you can apply to closing costs or a buydown.
- Combination packages such as buydown plus paid upgrades or limited HOA fee credits.
- Preferred-lender promotions with time-limited reduced rates for buyers who use the developer’s lender partner.
Terms vary by project and timing. Always confirm what is guaranteed and how it is documented in your purchase agreement.
What the numbers look like
Below are illustrative examples at price points common in the Seaport. Assumptions: 30-year fixed mortgage, 20 percent down payment, baseline note rate of 6.5 percent, and a 2-1 temporary buydown that sets year one at 4.5 percent, year two at 5.5 percent, then 6.5 percent thereafter. Payments shown are principal and interest only. They exclude taxes, insurance, HOA fees, PMI, and other charges.
Example A: Around $800,000
- Price: $800,000 → loan: $640,000
- P&I at 6.5%: about $4,050 per month
- P&I at 4.5% year one: about $3,247 → monthly savings about $803
- P&I at 5.5% year two: about $3,635 → monthly savings about $415
- Approximate two-year cumulative savings: about $14,600
Example B: Around $1,500,000
- Price: $1,500,000 → loan: $1,200,000
- Year one monthly savings: about $1,504
- Year two monthly savings: about $776
- Approximate two-year cumulative savings: about $27,300
Example C: Around $3,000,000
- Price: $3,000,000 → loan: $2,400,000
- Year one monthly savings: about $3,009
- Year two monthly savings: about $1,551
- Approximate two-year cumulative savings: about $54,700
Key takeaway: temporary buydowns meaningfully reduce early cash outlay, and the dollar savings scale with loan size. The developer’s cost to fund a buydown depends on the subsidy needed to create those payments, which can be similar to a one-time credit or a modest price concession. Exact equivalence depends on lender calculations and how the subsidy is structured.
Buydown or price cut?
Choosing between a buydown and a price reduction depends on how you plan to use the condo and how long you expect to hold the loan.
When a buydown fits your plan
- You want lower payments in the near term while you settle cash flow or await income changes.
- You expect to refinance in a few years, so a temporary payment reduction helps you manage carrying costs.
- The developer prefers to preserve list price and offers a buydown that delivers strong first-year savings.
When a price cut wins
- You plan to hold long term and want a permanently smaller loan balance and interest cost.
- You want the lower price to appear in the recorded sale price, which affects basis and future comps.
- Your lender or financial plan benefits from the lower loan amount for underwriting or appraisal reasons.
Neither path is universally better. The right choice aligns with your time horizon, cash flow needs, and financing strategy.
Rules and constraints to check
Understanding a few lender and investor rules up front will save time and protect your deal.
- Qualification rate. Some lenders qualify you at the note rate, not the buydown start rate. If so, the buydown helps cash flow but may not help your loan approval. Ask your lender which rate applies.
- Concessions caps. Loan programs limit the size and use of seller or developer credits. Limits vary by loan type and loan-to-value. Confirm what applies to your scenario.
- Appraisals and comps. A buydown preserves the contract price, which can help a development’s comps. Appraisers still rely on market comparables and building financials.
- Timing and escrow. Temporary buydown funds are usually placed with the lender at closing and drawn down each month. Make sure the purchase agreement details how the funds are handled.
- Tax treatment. Points you pay may be deductible in some cases. Seller or developer-paid points are treated differently. Ask your tax professional how this applies to you.
- Legal documentation. Ensure the buydown terms are written into the purchase and loan documents, including who pays, when the subsidy expires, and how funds appear on the closing statement.
How to compare two offers
Use this quick framework when a sales office or lender presents multiple options.
- Confirm the baseline. Get a written quote of the note rate, program type, and any lender fees for the non-buydown option.
- Detail the buydown. Ask for the temporary rate schedule, monthly payments for years one and two, and the exact dollar value of the subsidy.
- Check qualification. Find out which rate the lender uses to qualify you and how any concessions count toward caps.
- Add up the cash flows. Tally two-year payment savings for a temporary buydown, then compare that total to the value of a price cut or seller credit.
- Consider your timeline. If you expect to refinance, weigh near-term savings more heavily. If you plan to hold long term, evaluate a permanent rate buydown or a price reduction.
- Verify documentation. Ensure the contract clearly states payments, funding source, escrow handling, and any deadlines for promotions.
Key questions to ask
Developer or sales office
- Is the buydown documented in the purchase agreement and mortgage addenda, and who guarantees the funds?
- Is the incentive a seller concession or a lender promotion tied to a preferred lender, and is it transferable?
- Will you also provide credits for closing costs, HOA fees, or upgrades, and how do these interact with the buydown?
- What is the deadline for the promotion, and does it apply to all units or specific inventory only?
Lender or mortgage officer
- At what rate will you qualify me for underwriting purposes: the note rate or the buydown-adjusted rate?
- How are seller or developer buydowns treated for underwriting and concession caps for my loan program and LTV?
- Will the buydown impact appraisal review, PMI, or loan pricing in my case?
- If I plan to refinance, what is the break-even timeline compared with paying permanent points today?
Attorney and tax professional
- How will seller-paid buydown funds appear on the closing statement and be reported for tax purposes?
- What are the implications for my tax situation if points are paid by me versus by the seller or developer?
Make a Seaport plan with us
New-construction financing in the South Boston Waterfront rewards clear strategy. If you know how a buydown interacts with your timeline, you can negotiate confidently and pick the structure that truly fits your goals. Our team brings deep local knowledge of Seaport buildings, developer practices, and lender programs, along with a curated network to help you evaluate options quickly and clearly.
If you are weighing a Seaport opportunity and want a clear comparison of incentives, start a conversation with The Loveland Group. We will help you align the numbers with your lifestyle plan and negotiate the path that serves you best.
FAQs
What is a 2-1 buydown on a Seaport condo?
- It temporarily reduces your rate by 2 percentage points in year one and 1 percentage point in year two, then returns to the original note rate for the rest of the loan.
Does a temporary buydown change my note rate?
- No, it only lowers payments for the first years; after the buydown period, your rate reverts to the original note rate stated in your loan.
How do seller concession limits affect a buydown?
- Loan programs cap the amount and type of seller or developer credits; your lender can confirm how much can be applied to buydowns versus other closing costs.
Will a buydown help me qualify for the loan?
- Sometimes; many lenders qualify you at the higher note rate, so the buydown improves cash flow but may not change the underwriting decision.
Can I combine a buydown with closing cost credits?
- Often yes, but the total concessions must stay within program limits, and the contract must spell out how credits and buydown funds are applied.
