Is your 3-2-1 buydown stressing you out?

Jul 18

A couple of years ago, many buyers were encouraged to use temporary rate buydowns, such as the 3-2-1 or 2-1 buydown. These products offered a sweet-sounding promise: a lower interest rate today, with the expectation that rates would drop before the full rate kicked in.

Fast-forward to today... that refinance window never came.

Now, we’re seeing some homeowners caught off guard. The payments they got used to have jumped by hundreds of dollars a month. And it’s not just a budgeting issue—it’s a lifestyle creep problem.

The Problem with Temporary Buydowns

Here’s the cycle we’ve watched play out:

A buyer gets a home at a teaser rate of 4.5% for the first year.
Their mortgage payment fits nicely into their monthly budget.
Life happens. They get used to that number.
In year two, the rate jumps to 5.5%. In year three? 6.5%–7.5%.
Suddenly, they’re paying $500–$800 more every month… and the raise or refinance they were counting on didn’t materialize.

We call this lifestyle creep—your financial habits grow to match your temporarily comfortable payment, and then reality hits.

We Saw This Coming

At The Olson Group, we made a point not to push these products—especially for first-time buyers—because we’ve seen this movie before.

Instead, we focused on:

✅ Negotiating permanent rate buydowns with seller credits
✅ Using grant money or silent seconds to reduce upfront costs
✅ Helping our buyers lock in affordable, long-term payments

One of our clients utilized a $15,000 seller credit to permanently lower their rate to 4.99% and cover closing costs. They knew what they were signing up for on Day One—and they’re still paying the same amount today.

What If You’re in a 2-1 or 3-2-1 Buydown Now?

If you’re feeling the pressure from a rising mortgage payment, you’re not alone. And you’re not out of options.

There are still things we can do:

Re-assess your loan structure with one of our preferred lenders
Look for updated grant or assistance programs you may now qualify for
In some cases, we’ve helped clients sell and buy again in a smarter way—using equity and negotiation to secure a better long-term position

A Storm May Be Coming for Some Homeowners

We’re not here to scare anyone, but we’re seeing signs that some temporary buydown homeowners are struggling to make ends meet. Missed payments could lead to foreclosures in certain pockets of the market.

If you’re in this situation—or think you might be soon—let’s talk before it becomes a crisis. Whether you bought from us or not, we’re happy to explore your options.