Rate Buy-downs: Lower Monthly Payments for Your Clients
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July 11, 2025 |
Rate Buy-downs: Lower Monthly Payments for Your Clients
Give your clients breathing room with our Rate Buy-down option—an upfront fee for a reduced 1-year mortgage rate and lower monthly payments, without changing the deal structure.
As a mortgage broker, you’re often the first to hear your clients’ concerns about high monthly payments. When cash flow is tight—whether for short-term borrowers, real estate investors, or those with variable income—finding solutions to reduce monthly payments is essential.
That’s where our Rate Buy-down option comes in.
So, What Is a Rate Buy-down?
A Rate Buy-down is a straightforward strategy: your client pays a one-time fee at funding, and in exchange, their mortgage interest rate is reduced for a 1-year term. The result? Lower monthly payments, without the need for extra income documentation or changes to the deal structure.
At Neighbourhood, this option is available exclusively on our 1-Year Closed Term mortgages in Alberta, British Columbia, Ontario, and Nova Scotia. The default buy-down fee is 1.5% of the mortgage amount, which can be deducted from the advance at funding or paid separately at closing. For example, if the standard 1-year closed rate is 7.35%, applying the buy-down reduces it to 5.85%—a significant difference for clients managing tight cash flow.
Why This Matters for Your Clients
The Rate Buy-down is ideal for clients who need short-term payment relief. Self-employed borrowers with seasonal income, landlords dealing with tenant turnover or renovations, and those recovering from recent credit events all stand to benefit. Real estate investors and bridge clients, in particular, appreciate the flexibility of a lower rate for a year, especially if they plan to refinance or sell within twelve months.
How It Works in Practice
Default Fee:
A 1.5% Rate Buy-down Fee is deducted from our posted rate (e.g., 7.35% → 5.85%).
Broker Flexibility:
You may request a lower fee based on the deal. Our underwriting team can manually adjust based on scenario strength.
Eligible Product:
1-Year Closed Term only
Available in AB, BC, ON, and NS
If you include “buy-down” in your submission notes, we’ll send a custom quote email showing only the Buy-down scenario.
To help you visualize the impact of a rate buy-down, use the sample calculator below to compare monthly payments at standard versus reduced rates based on your client’s profile.
This calculator is for illustrative purposes only and is intended for licensed mortgage brokers. The rates and outputs shown are based on standard assumptions and may not reflect the actual terms offered by Neighbourhood Holdings. Final pricing is subject to change and will depend on the borrower’s complete application, property details, underwriting review, and current market conditions. The Buy-down Fee is subject to change and may be manually adjusted by request. Monthly interest payments are calculated using an interest-only payment structure. All terms are determined solely at Neighbourhood’s discretion and are not guaranteed until a formal quote is issued.
What Happens After the 1-Year Term?
Our mortgage product is designed primarily for borrowers in transition, which is why the rate buy-down is structured as a short-term solution. At the end of the 1-year closed term, if your client is offered and chooses to renew their mortgage with Neighbourhood, the renewal rates and terms are determined by the prevailing rates and terms at the maturity date. A $295 renewal fee will apply should they decide to continue their mortgage with us for another term.
Since most transitional borrowers typically move to long-term financing solutions or alternative arrangements after their transition period, this structure provides the targeted relief they need during their temporary situation while maintaining clear expectations for renewal terms.
Overall, the Rate Buy-down is more than a niche feature—it’s a strategic lever brokers can use to serve a broader range of clients. In a world where affordability is top of mind, this option helps deliver a lower rate and better monthly payment—all within a 1-year commitment.
If you’d like to see how the Rate Buy-down could fit your next deal, contact your BDM for a deal run or access our lending guidelines here.
Author Profile
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Marketing Manager at Neighbourhood Holdings |
Jessica Yang is the Marketing Manager at Neighbourhood Holdings, where she leads marketing campaigns and content strategy. As a UBC Media Studies graduate, Jessica also completed BrainStation’s Digital Marketing Program and became a BCFSA-licensed mortgage broker.
Beyond her professional pursuits, Jessica enjoys travelling and documenting her experiences through vlogging, finding inspiration in exploring new cultures and sharing her journey with others.
This blog post is intended for informational and educational purposes only and is directed toward licensed mortgage brokers. It does not constitute financial advice, a mortgage offer, or a commitment to lend. All lending decisions are subject to underwriting review and applicable lending criteria. Please consult your Business Development Manager or underwriter for guidance on specific client files.