By Benjamin Finnerty (S), REALTOR® (RS-83812) with Keller Williams Realty Maui · Kīhei, Maui · 808-481-9748

Quick Answer: A rate buydown uses upfront money, often a seller credit, to lower a buyer’s mortgage rate. With Freddie Mac’s 30-year average at 7.40% on October 8, 2026, a 2-1 buydown on that rate would mean 5.40% in year one and 6.40% in year two. Fannie Mae limits seller-paid contributions to 2% to 9% of the price, depending on occupancy and down payment.

I’m Benjamin Finnerty, a REALTOR® in Kīhei with Keller Williams Realty Maui, and here’s what a rate buydown on Maui can and can’t do for you this fall. With rates at their highest level since late 2023 and many listings sitting for months, seller concessions have become one of the most practical negotiating tools on the table. The key is knowing the rules before you write the offer.

What is a mortgage rate buydown?

A buydown is prepaid interest that lowers your rate, either for the whole loan or for the first few years. Someone pays the cost upfront at closing: the buyer, the seller, a builder, or the lender.

• Permanent buydown: You pay discount points to lower the rate for the life of the loan.
• Temporary buydown: The rate is reduced for an initial period, then steps up to the full note rate. A “2-1” is 2 percentage points lower in year one and 1 point lower in year two. A “1-0” is 1 point lower in year one only.

Under Fannie Mae’s Selling Guide (B2-1.4-04), a temporary buydown can last no more than three years, the borrower’s rate can rise no more than 1% per year, and the reduction can’t exceed 3%. The funds are held in a custodial account and drawn down each month.

How much does a 2-1 buydown cost on a Maui condo or home?

Roughly 1.9% of the price on the examples below. Here’s the math using Maui County’s January-September 2026 medians from the REALTORS® Association of Maui, 20% down, a 30-year fixed note rate of 7.40%, principal and interest only:

	Median condo	Median single-family
Price (RAM, Jan-Sept 2026)	$655,000	$1,219,000
Loan (80%)	$524,000	$975,200
Payment at 7.40%	$3,628	$6,752
Year 1 at 5.40%	$2,942	$5,476
Year 2 at 6.40%	$3,278	$6,100
Approximate buydown cost	$12,433	$23,138

My calculations. Your actual rate, fees and buydown cost will come from your lender. Taxes, insurance and HOA dues are not included.

For comparison, cutting the condo price by the same $12,433 would lower the 7.40% payment by only about $69 a month. The buydown saves about $686 a month in year one. The trade-off: the price cut lasts for 30 years, and the buydown lasts for two.

How much can a Maui seller contribute toward a buydown?

On conventional loans sold to Fannie Mae, seller-paid buydowns count as “interested party contributions,” and they’re capped based on occupancy and loan-to-value (Fannie Mae Selling Guide B3-4.1-02):

Occupancy	Loan-to-value	Maximum contribution
Primary or second home	Over 90%	3%
Primary or second home	75.01% to 90%	6%
Primary or second home	75% or less	9%
Investment property	Any	2%

Contributions above the cap are treated as a sales concession and deducted from the price. FHA, VA and jumbo loans have their own rules, so ask your lender which limits apply to your loan.

Do I still qualify at the lower rate?

No. Fannie Mae requires lenders to qualify you at the full note rate, not the bought-down rate. A temporary buydown helps with cash flow in the first years, but it does not stretch your approval amount.

Two more Maui-specific limits matter:

• Investment properties: Fannie Mae’s temporary buydown rules apply to principal residences and second homes, not investment properties. If you’re buying a condo mainly as a rental, a permanent buydown or a price reduction may be your only option.
• Condo eligibility: Some Maui condo-hotel and resort complexes don’t qualify for conventional financing at all. See my guide to hotel-zoned condos on Maui before you assume a buydown is available.

Why are buydowns showing up more on Maui right now?

Because rates are up and listings are taking longer to sell. Freddie Mac’s 30-year average was 7.40% on October 8, 2026, up from 7.28% the week before and 6.30% a year earlier. RAM’s September 2026 report showed a countywide median of 199 days on market for condos and 134 days for single-family homes. When a property has been on the market that long, a credit toward the buyer’s rate can matter more to the buyer than a small price cut.

My Take: What I’m Telling Buyers and Sellers About Buydowns

For buyers, a 2-1 buydown is most useful if you expect your income to rise or you plan to refinance if rates come down. Keep in mind that from year three on you pay the full note-rate payment unless you refinance, and lower future rates are not guaranteed, so make sure that full payment works for you today. Ask your lender to quote three options side by side: a temporary buydown, a permanent buydown with points, and the same dollars as a price reduction.

For sellers, offering a credit that the buyer can use toward a buydown can widen your pool of buyers without lowering your list price. My general approach is to price to where the market appears to be going, not where it’s been, by looking at what the next three months suggest, so you’re leading the market rather than following it. That’s a judgment based on current data, not a guarantee, and a concession can be part of that plan.

Either way, get the lender involved before the offer, not after. For more on this fall’s rate picture, see Maui mortgage rates at 7.40% and the 2026 Maui conforming loan limit.

General information, not tax, legal or lending advice; confirm with your lender, a CPA or a Hawaiʻi attorney.

Frequently Asked Questions

Can the seller pay for my rate buydown on Maui?
Yes, within your loan program’s limits. For Fannie Mae conventional loans, seller contributions are capped at 3%, 6% or 9% for primary and second homes depending on loan-to-value, and 2% for investment properties.

What happens to unused buydown funds if I refinance or sell?
That depends on your loan documents and lender. Ask before closing how leftover funds are handled.

Is a 2-1 buydown better than a price reduction?
It depends on how long you’ll keep the loan. A buydown gives larger savings in the first two years; a price reduction gives a smaller saving for the life of the loan.

Do I qualify at the bought-down rate?
No. Under Fannie Mae’s rules, you qualify at the full note rate.

Ask Benjamin

If you’re buying or selling on Maui and want to compare a buydown with a price reduction on a specific property, I’m glad to run the numbers with you and your lender. I’m Benjamin Finnerty; call or text 808-481-9748 or email benjamin@the808team.com.

Sources: Freddie Mac Primary Mortgage Market Survey (Oct. 8, 2026); Fannie Mae Selling Guide B2-1.4-04 and B3-4.1-02; REALTORS® Association of Maui, Monthly Indicators, September 2026; Maui Now (Oct. 9, 2026).