An interest-only buydown combines two payment reduction strategies: a temporary rate buydown for years 1–3, and an interest-only payment structure. The result is the lowest possible payment in the early years of your loan. We offer this on Fannie Mae, FHA, and select jumbo programs in California.

What Is an Interest-Only Buydown?

A standard mortgage payment includes principal and interest (P&I). An interest-only mortgage lets you pay only the interest portion for a set period — typically 5–10 years. When you layer a temporary rate buydown on top of an IO structure, you get:

Lower rate from the temporary buydown (years 1–3)
Lower payment from the IO structure (no principal repayment in the IO period)
Maximum cash flow in the early years of the loan

Payment Comparison: IO Buydown vs. Standard Amortizing Loan

On a $2,000,000 loan at a 6.75% note rate:

Product	Year 1 Rate	Year 1 Payment
Standard 30-yr fixed	6.75%	$12,974/mo P&I
3/2/1 buydown, 30-yr fixed	3.75%	$9,264/mo P&I
IO only, no buydown	6.75%	$11,250/mo IO
IO + 3/2/1 buydown	3.75%	$6,250/mo IO

The IO + buydown combo produces a year-one payment of $6,250 on a $2M loan — versus $12,974 on a fully amortizing loan at the note rate. That’s a $6,724/month difference.

Which Loan Programs Allow an IO Buydown?

Fannie Mae: Allows temporary buydowns on IO adjustable-rate products in certain configurations. Ask us about current Fannie Mae IO eligibility.
FHA: FHA does not offer true interest-only products, but seller-paid buydowns can dramatically reduce FHA payments in years 1–3.
Jumbo portfolio: Most of our IO buydown business is done through jumbo portfolio lenders who allow both IO periods and temporary buydown structures on the same loan. This is the most flexible and powerful combination for Marin and Bay Area buyers.

Who Is an IO Buydown For?

This product is ideal for:

High-earning professionals who want to maximize cash flow in early years (doctors, attorneys, tech executives, business owners)
Buyers expecting income growth — you start with the lowest possible payment and your income catches up
Investors who want maximum monthly cash flow on a California rental property or second home
Buyers using seller concessions — negotiate the seller to fund the buydown and lock in 3 years of reduced payments

What Happens After the IO and Buydown Period?

After year 3, the buydown ends and you’re at the full note rate. After the IO period ends (typically year 5 or 10), principal payments begin and the loan fully amortizes over the remaining term. You need to be financially prepared for the higher payment — or plan to refinance when rates drop.

Our job is to model both scenarios with you before you commit, so there are no surprises.

Talk to Michael DiVita

Interest-only buydowns aren’t something you’ll find at every lender — or every mortgage broker. We structure these regularly for buyers in Marin County, San Francisco, the East Bay, and across California. 📞 (800) 239-1103 | Cell: (310) 849-9124

Interest-Only Buydown California | DiVita Home Finance