You’ve probably heard me talk a lot about the 1-0 buydown lately — and for good reason.
It’s one of the most underused tools buyers can use in today’s market to lower their interest rate (and payment) for the first year of their mortgage.
But I get this question a lot recently:
“What happens in Year 2 if rates don’t drop… or my income doesn’t go up?”
It’s a fair question — and one worth planning for.
Quick Recap: What a 1-0 Buydown Is
A 1-0 buydown temporarily lowers your interest rate by 1% in the first year of your mortgage.
Example: If your fixed rate is 6.75%, you’ll pay as if it’s 5.75% for Year 1.
The difference in interest for that first year is paid upfront (by the seller or lender), so the savings is real — and you keep it.
But in Year 2, your rate and payment return to the original note rate. That’s where planning matters.
Three Smart Moves to Prepare for Year 2
A 1-0 buydown is not about hoping rates go down — it’s about using Year 1 wisely so you’re ready for anything.
1. Save the Difference
If your monthly savings is $400, that’s $4,800 by the end of the first year.
Put it in a high-yield savings account so it’s ready to cover the payment increase — or be used for a lump-sum principal reduction to lower your loan balance.
2. Pay Down High-Interest Debt
If you’re carrying credit card balances at 20% interest, use your Year 1 savings to knock those out.
When the higher payment kicks in during Year 2, you’ll have more breathing room in your monthly budget.
3. Build an Emergency Cushion
Life happens — job changes, unexpected bills, car repairs.
A stronger emergency fund means you won’t feel trapped if rates stay higher for longer.
Bonus: Use Year 1 to Strategically Increase Income
This might mean asking for a raise, upgrading your skills, or starting a side hustle.
Your 1-0 buydown gives you a financial runway to make those moves before the full payment kicks in.
The Bottom Line
A 1-0 buydown is not a gamble — it’s a tool.
If rates drop in Year 1, you can refinance and keep your payment low. If they don’t, you’ve used that first year to get ahead financially so Year 2 isn’t a shock.
Want to see exactly what your Year 1 savings could be?
Contact Houzd Mortgage and we’ll run the numbers so you can have a clear plan before you even start house shopping.