Sell or Rent Out Your South Bay Home? How to Decide

November 11, 2026 By Dario Leave a Comment

Your life is changing — a new job, a growing household, a move out of state — and you’re holding a home in Chula Vista, Bonita or Otay Ranch. Do you sell it, or keep it and rent it out? It’s one of the most common questions we hear, and with the South Bay’s steady rental demand, both paths can make sense. The right answer depends on your numbers, your taxes and how hands-on you want to be.

As a company that both sells homes and manages about 110 rentals across the South Bay, we see this decision from both sides every week. Here’s the framework we walk our clients through.

Start With the Numbers: Will the Home Cash Flow?

The first question isn’t “what’s the home worth?” — it’s “what will it earn after every expense?” Many owners compare their mortgage payment to the expected rent and stop there. That’s only part of the picture.

Build a realistic monthly budget that includes:

Mortgage principal and interest (your current rate matters a lot here — a low locked-in rate is one of the strongest reasons to keep a home)
Property taxes and homeowners/landlord insurance (a landlord policy is different from a homeowner’s policy)
HOA dues, common in Otay Ranch, Eastlake and many South Bay communities — and check whether your HOA restricts rentals
Maintenance and repairs (a common rule of thumb is to budget a percentage of rent every month, more for older homes)
Vacancy between tenants, plus turnover costs like paint, cleaning and carpet
Property management fees, if you won’t be managing it yourself

If the rent comfortably covers all of that, keeping the home can build long-term wealth through appreciation and loan paydown. If it barely breaks even — or runs negative — you’re effectively paying each month to own an investment, and selling may be the smarter move.

Get a Real Rent Estimate, Not a Guess

Online rent estimators can be off by hundreds of dollars in either direction. Rents in the South Bay vary block by block based on school boundaries, condition, parking, yard space and whether pets are allowed. Ask for a rental analysis based on recently leased comparable homes — not just listing prices.

Understand the Tax Trade-Offs Before You Decide

Taxes are often the deciding factor, and timing matters more than most owners realize.

The Home Sale Exclusion Clock

Under IRS rules, if you owned and lived in the home as your main home for at least two of the five years before the sale, you may be able to exclude up to $250,000 of gain ($500,000 for most married couples filing jointly). Here’s the catch: once you move out and rent the home, that five-year window keeps moving. Rent it for more than about three years and you may lose the exclusion entirely.

For long-time South Bay owners sitting on significant appreciation, that can be a very big number. If you’re on the fence, it’s worth knowing exactly when your window closes.

Depreciation and Other Considerations

While the home is a rental, you’ll generally claim depreciation — which lowers your taxable rental income but is typically “recaptured” and taxed when you sell, even if the rest of the gain is excluded.
Once a property is held as a rental, a 1031 exchange may let you defer gains by trading into another investment property.
Rental income, expenses and depreciation add complexity to your tax return, so plan on working with a CPA.

This section is general information, not legal or tax advice. Please consult a qualified CPA or tax attorney about your specific situation.

Know the Rules for California Landlords

Becoming a landlord in California comes with real responsibilities. Depending on the property, your rental may be covered by statewide rent caps and just-cause eviction rules (AB 1482), unless an exemption applies — for example, certain single-family homes owned by individuals, but only if the required exemption notice is included in the lease. You’ll also need to follow security deposit limits, required disclosures, habitability standards and fair housing laws.

None of this is a reason not to rent — thousands of South Bay owners do it successfully — but it’s a reason to go in prepared rather than learning as you go.

Be Honest About Your Time and Distance

Managing a rental means screening applicants, collecting rent, handling the 10 p.m. water heater call, coordinating vendors, doing inspections and keeping records. That’s manageable if you live in Chula Vista and have the time. It’s much harder from Sacramento, Texas or overseas.

This is where professional property management changes the equation. A good manager handles leasing, maintenance, compliance and accounting so you can keep the asset without the day-to-day work. Just be sure to include the management fee in your cash flow math above.

A Quick Decision Checklist

Keeping and renting often makes sense when:

You have a low mortgage rate you’d hate to give up
The home cash flows (or comes close) after all expenses
You may move back someday, or you want a long-term investment
You have reserves for repairs and vacancies

Selling often makes sense when:

Your capital-gains exclusion window is closing and the gain is large
The rent wouldn’t cover your costs
You need the equity for your next purchase
You don’t want to be a landlord — even with help

Frequently Asked Questions

Can I rent out my home for a year or two and still sell tax-free later?

Possibly. If you lived in the home as your main residence for at least two of the five years before the sale, the exclusion may still apply. Confirm your exact dates with a CPA before you sign a lease.

How much can I rent my South Bay home for?

It depends on location, size, condition and amenities. We recommend a rental analysis based on recently leased comparable homes rather than an online estimate.

Do I need to tell my lender or insurance company if I rent out my home?

Usually, yes. Your homeowners policy typically needs to be converted to a landlord (dwelling) policy, and some loans have occupancy requirements. Check with your insurance agent and lender before moving out.

What if my HOA doesn’t allow rentals?

Some South Bay HOAs have leasing rules, such as minimum lease terms or limits on the number of rentals. Review your CC&Rs and HOA rules early — they can make the decision for you.

Let’s Run the Numbers Together

Whether you decide to sell or rent, we can help you compare both options side by side. Find out what your home is worth, or learn more about our property management services in Chula Vista and the rest of the South Bay.

Contact Kali Real Estate & Property Management at (619) 651-0433 or visit kalirealestate.com for property management, leasing or buying and selling help. We’ll give you an honest recommendation — even if that means telling you to sell.

Moving Out? How to Get Your Full Security Deposit Back in California

November 5, 2026 By Dario Leave a Comment

Moving out is busy enough without worrying about whether you’ll see your security deposit again. The good news: in California, the rules are clear, and most deposit disputes can be avoided with a little planning. As a property management company that handles move-ins and move-outs across Chula Vista, Bonita, Otay Ranch, Eastlake, National City and Imperial Beach every month, we see what helps renters get their full deposit back, and what costs them.

Here’s our step-by-step guide for renters in South Bay San Diego (and anywhere in California) who want a smooth move-out and a full refund.

This article is general information, not legal advice. For questions about your specific situation, talk with a qualified attorney.

What California Law Says About Your Security Deposit

Security deposits in California are governed by California Civil Code Section 1950.5. A few key points every renter should know:

Deposit limits: For most rentals, a landlord can’t collect more than one month’s rent as a security deposit (plus the first month’s rent). Certain small landlords who are individuals may collect up to two months.
What can be deducted: Unpaid rent, damage beyond normal wear and tear, and cleaning needed to return the unit to the same level of cleanliness it was in when you moved in.
What can’t be deducted: Ordinary wear and tear, or damage that existed before your tenancy started.
The 21-day rule: Within 21 days after you move out, your landlord must return your deposit or send an itemized statement explaining any deductions, with the balance.
Receipts: If repairs or cleaning deductions total more than $125, the itemized statement generally must include copies of receipts or invoices (or a good-faith estimate if work isn’t finished yet).

There’s also a newer requirement worth knowing about. Since April 1, 2025, landlords must photograph the unit after you return possession and before making repairs or cleaning they’ll charge against your deposit. For tenancies that began on or after July 1, 2025, landlords must also take photos at the start of the tenancy. Those photos protect both sides, and they’re one more reason to take your own.

Wear and Tear vs. Damage: Know the Difference

Most deposit questions come down to this distinction. Normal wear and tear is the gradual aging that happens when people live in a home. Damage is harm that goes beyond normal use.

Usually normal wear and tear

Light scuffs or minor marks on walls
Carpet that’s worn in high-traffic areas
Faded paint or blinds from sunlight
A few small nail holes from hanging pictures

Usually damage

Large holes in walls or doors
Pet stains, odors or scratched flooring
Broken blinds, screens or fixtures
Burns, deep gouges or water damage caused by neglect

Every situation is a little different, but if you’re unsure whether something counts, it’s better to ask before you move out than to argue about it afterward.

Your Move-Out Checklist: 6 Steps to a Full Refund

1. Give proper written notice

Check your lease for the required notice period and how notice must be delivered. A month-to-month tenant typically needs to give at least 30 days’ written notice. Put it in writing, keep a copy, and include your forwarding address so your deposit and itemized statement reach you.

2. Pull out your move-in documents

Find your move-in inspection report and any photos you took when you moved in. These are your baseline. If something was already worn or damaged on day one, you shouldn’t be charged for it.

3. Request a pre-move-out inspection

This is one of the most underused tenant rights in California. You can ask your landlord or property manager for an initial inspection up to two weeks before you move out, and you have the right to be present. The landlord should give you 48 hours’ written notice of the inspection time, and afterward provide a written list of the repairs or cleaning they plan to charge for. That gives you time to fix those items yourself before you hand back the keys.

4. Clean thoroughly (and smartly)

The standard is to return the home to the same level of cleanliness it had when you moved in. Focus on the areas that most often lead to deductions:

Kitchen: inside the oven, stovetop, refrigerator, microwave and cabinets
Bathrooms: tub, shower, toilet, mirrors and grout
Floors: vacuum carpets, mop hard floors, clean baseboards
Walls and doors: wipe away fingerprints and smudges
Windows, tracks and blinds
Patio, garage and yard, if they’re part of your rental

5. Make small repairs the right way

Replace burned-out light bulbs, patch small nail holes, and swap dead smoke detector batteries if your lease allows it. Check your lease before painting or doing bigger repairs; mismatched paint or amateur fixes can cost more than leaving it to a professional.

6. Document everything when you leave

After the last box is out and the cleaning is done, walk through every room and take date-stamped photos and video, including inside appliances and closets. Return all keys, garage remotes and gate fobs, and get written confirmation of the date you returned possession.

What Happens After You Move Out

Your landlord has 21 days to return your deposit or send an itemized statement. If you see a deduction you don’t agree with, start by calling or writing to your landlord or property manager. Compare the charge to your move-in report and photos, and ask for the receipts or photos supporting it. Most disagreements are resolved with a calm, documented conversation.

If a landlord keeps a deposit in bad faith, California law allows a court to award damages of up to twice the amount of the deposit, in addition to actual damages. Small claims court is an option many renters use for these disputes.

How We Handle Move-Outs at Kali Real Estate

For the rentals we manage throughout South Bay San Diego, we aim to make move-outs predictable and fair for both residents and owners. That means documented move-in condition reports, photos at move-in and move-out, a pre-move-out inspection when residents request one, and clear itemized statements sent on time. Transparency up front prevents most disputes at the end.

If you’re looking for your next home, browse our current rental listings to see what’s available in Chula Vista and the surrounding South Bay.

FAQ: Getting Your Security Deposit Back in California

How long does my landlord have to return my security deposit?

21 days after you move out. Within that time, the landlord must return the full deposit or send an itemized statement of deductions along with any remaining balance.

Can my landlord charge me for carpet cleaning or repainting?

Only if it’s needed to fix damage beyond normal wear and tear, or to return the unit to the cleanliness level it had when you moved in. Routine aging of carpet and paint over time is generally considered normal wear and tear.

Do I have to be there for the move-out inspection?

You aren’t required to be, but we recommend it. California renters have the right to request a pre-move-out inspection and to be present for it, which gives you a chance to fix issues before they turn into deductions.

Can I use my security deposit as my last month’s rent?

Generally, no. The deposit is meant to cover unpaid rent, damage and cleaning after you leave, so using it as last month’s rent without your landlord’s written agreement can create problems. Check your lease and talk with your landlord first.

Questions About Renting in the South Bay?

Whether you’re a renter planning your next move or an owner who wants a professional handling move-ins, move-outs and deposits, we’re here to help. Contact Kali Real Estate & Property Management at (619) 651-0433 or visit kalirealestate.com for property management, leasing, or buying and selling help.

New California Rental Laws for 2027: A Landlord Checklist

November 3, 2026 By Dario Leave a Comment

Every fall, Sacramento sends California landlords a new batch of rules, and 2026 was no exception. Several bills signed this year take effect on January 1, 2027, and an important pet-policy law follows on April 1, 2027. If you own a rental in Chula Vista, Bonita, Otay Ranch, Eastlake, Imperial Beach, National City or anywhere in the South Bay, now is the time to update your leases, listings and procedures, before the new year rather than after a problem comes up.

We manage roughly 130 rentals across the South Bay, so we’ve been working through these changes ourselves. Here’s our plain-English checklist of what’s changing, what’s already in effect, and what to do about it.

This article is general information, not legal advice. Talk with a qualified California landlord-tenant attorney about your specific situation.

What Changes on January 1, 2027

Altered or AI-edited listing photos need a disclosure (AB 2025)

Virtual staging, sky replacement and AI “cleanup” tools are everywhere in rental marketing. Under AB 2025, signed in September 2026, a rental advertisement that uses a digitally altered image must include a disclosure that the image was altered. The unaltered original image must also be included, as the law specifies. For agents and brokers, a violation is treated as a violation of the Real Estate Law.

What to do: Review the photos on your current listings and syndication sites. Keep the original files for any photo you’ve edited, and label virtually staged or enhanced images clearly. Basic edits like cropping and brightness are a different matter from adding furniture or removing a power line, but if you’re unsure, disclose.

Tighter rules for serving eviction papers (AB 747)

AB 747, the SPARE Act, changes how unlawful detainer (eviction) paperwork must be served. It defines “reasonable diligence” as at least three good-faith attempts at personal delivery, made on three different days at three different times, before a process server moves to other service methods. In eviction cases, the proof of service must generally include a photo of the service location with a readable date, time and GPS stamp. Industry summaries report that the main service changes take effect January 1, 2027.

What to do: Expect evictions to take a bit longer at the service stage, and use a registered process server and an attorney who are current on the new requirements. Shortcuts here can get a case thrown out and send you back to square one.

Price-gouging rules after a declared emergency (SB 1365)

California’s price-gouging law (Penal Code Section 396) generally limits rent increases to 10% after a state or local emergency is declared. SB 1365, signed September 30, 2026, updates how those rules apply to rental housing. Among other changes, it adds a defense for increases directly tied to repairs or additions beyond normal maintenance made in the year before the declaration. Given wildfire and storm declarations in Southern California, this matters for San Diego County owners too.

What to do: Before raising rent or listing a vacant unit, check whether an emergency declaration covers your area. Keep receipts and dates for major repairs and upgrades.

Coming April 1, 2027: Written Pet Policies (SB 1296)

SB 1296 is the change most likely to affect day-to-day leasing. Starting April 1, 2027, landlords and their agents must:

Have a written pet policy or pet addendum for the property.
Make that policy available on the property’s website, in digital advertisements, and in information given to rental search sites.
Give applicants a written copy of the pet policy with every rental application.
Describe the rights, responsibilities and requirements for tenants with pets at the property.

If you charge an application fee without first disclosing the pet policy, and as a result the applicant is no longer eligible or decides not to proceed, the applicant can ask in writing for a refund. You then have seven business days to refund the fee. The law doesn’t change the rules for service animals and support animals, which are covered by separate fair housing laws.

What to do: Write a clear pet policy for each property, even if the answer is “no pets,” and attach it to every listing and application packet. That covers allowed animals, deposits, breed or size limits where permitted, and responsibilities like waste cleanup and damage.

Already in Effect: 2026 Rules to Double-Check

Several laws took effect January 1, 2026. We still see leases that haven’t caught up with them:

Stove and refrigerator (AB 628): For leases entered into, amended or extended on or after January 1, 2026, a working stove and refrigerator are part of what makes a unit legally habitable.
Internet opt-out (AB 1414): Tenants generally must be allowed to opt out of paying for bundled third-party internet service as a condition of the tenancy.
Electronic deposit refunds (AB 414): If a tenant paid rent or the deposit electronically, the security deposit refund generally goes back electronically too, unless you agree otherwise in writing.

As a reminder, the statewide rent cap and just-cause rules under AB 1482 (the Tenant Protection Act) remain in place for covered properties. The cap is 5% plus local inflation, never more than 10% a year.

Your Year-End Landlord Checklist

Update your lease and addenda templates for 2026 and 2027 changes.
Write a pet policy for every property before April 1, 2027.
Audit listing photos and keep the unaltered originals.
Confirm your eviction attorney and process server are following AB 747.
Check that appliances are in good working order at every turnover.
Keep repair and upgrade records with dates and receipts.

If that list feels like a lot, it’s exactly why many owners hand compliance off to a professional. Learn more about our property management services, or see how we serve owners locally with property management in Chula Vista.

FAQ: California Rental Laws for 2027

Do I have to allow pets under the new law?

No. SB 1296 is a disclosure law. It requires a written pet policy and timely disclosure, but you decide what that policy says, as long as you follow fair housing rules for service and support animals.

When does the pet policy requirement start?

April 1, 2027. Plan to have your written policy attached to listings and applications before then.

Does the altered-photo rule apply if I just brighten my listing photos?

The law is aimed at images that have been digitally altered. Simple exposure fixes are generally lower risk than virtual staging or removing features, but when in doubt, disclose and include the original. Check with your broker or attorney on borderline cases.

Do these laws apply to single-family rentals and condos?

Most of them apply to residential rentals broadly. Some rules, like the AB 1482 rent cap, have exemptions. Whether your property qualifies depends on its specifics, so get advice before relying on an exemption.

Need Help Staying Compliant?

At Kali Real Estate & Property Management, we keep up with California’s changing rules so South Bay owners don’t have to. Whether you need full-service property management, help leasing a vacant unit, or advice on buying or selling an investment property, call us at (619) 651-0433 or visit kalirealestate.com.

How Do I Know If I Should Hire a Property Manager?

July 27, 2026 By Dario

If you own rental property in Chula Vista, Bonita, Eastlake, Otay Ranch, or anywhere in San Diego’s South Bay, you’ve probably asked yourself this question at 11 p.m. while dealing with a tenant text about a broken garbage disposal. Here’s how to figure out the answer for real.

Start With Your Time, Not Your Money

Most landlords think the property manager decision comes down to the fee — typically 8-10% of monthly rent in the South Bay market. But the real cost isn’t the percentage. It’s what your time is worth.

Ask yourself:

Do you have 5-10 hours a month to handle maintenance calls, tenant screening, rent collection, and paperwork?
Can you respond to a maintenance emergency at 2 a.m. or during your workday?
Do you live near your rental, or are you managing from out of the area?

If you’re self-managing a property more than 30-45 minutes from where you live, the math rarely works in your favor once you count gas, missed work, and slower response times.

Signs You Should Hire a Property Manager

You own 3+ units. Somewhere around the second or third property, the administrative load stops being a side task and starts being a part-time job — lease renewals, rent tracking, maintenance coordination, and owner accounting all compound fast.

You don’t know current landlord-tenant law cold. California is one of the most regulated states for rental housing. AB 1482 rent caps, local just-cause ordinances (Chula Vista has its own under CVMC 9.65), AB 12’s new security deposit limits — getting any of these wrong can mean real liability. A property manager should already be tracking these changes so you don’t have to.

You hate confrontation. Rent collection, lease violations, and eventual evictions require someone who can be firm and unemotional. If tenant conflict keeps you up at night, that’s a signal.

Your property sits vacant longer than it should. If you’re not actively marketing, screening multiple applicants, and pricing competitively against current comps, you’re likely losing more in vacancy and turnover than a management fee would ever cost.

You’re an out-of-area or accidental landlord. Inherited a house? Relocated for work and kept your old home as a rental? These situations almost always benefit from professional management, since you can’t easily respond in person.

Signs You Might Be Fine Self-Managing

You own one property, live nearby, and enjoy the hands-on involvement
You have flexible time and a reliable network of contractors
You’re comfortable with California’s disclosure, deposit, and notice requirements
Your tenant relationship is stable and low-conflict

The Real Test

Here’s the simplest gut check: if a $500 repair emergency came in tomorrow at 6 a.m., could you handle it without disrupting your job, your family, or your peace of mind? If the honest answer is no, a property manager isn’t a luxury — it’s protecting the asset you already worked hard to buy.

Still Not Sure?

Every owner’s situation is different, and the right answer often comes down to your specific property, portfolio size, and how hands-on you want to stay. If you’d like a second opinion on whether self-managing still makes sense for your rental, Kali Real Estate & Property Management is happy to walk through it with you — no pressure, just a straight answer based on what we see across the South Bay market every day.

South Bay San Diego Mid-Year 2026 Market Update

June 23, 2026 By Dario

Chula Vista Housing Market 2026: Mid-Year Update | Kali Real Estate

South Bay Market Update · June 2026

Chula Vista Housing Market: Mid-Year 2026 South Bay Update

A mid-year look at the Chula Vista housing market — plus Bonita and Otay Ranch — for buyers, sellers, and rental owners.

~$800K

Median Sale Price

↔ Flat YoY

6.47%

30-Yr Fixed Rate

↓ from ~6.8% a yr ago

~3 wks

Days on Market

Well-priced homes

~$2,600

Avg. Apartment Rent

↔ Flat YoY

The 30-second summary

Half a year into 2026, the Chula Vista housing market has settled into something it hasn’t felt like in a while: a balanced market. Prices have leveled off, homes still sell quickly when they’re priced right, rates have eased from last year, and rents are holding steady. Here’s what that means across the South Bay, depending on where you sit.

If you’re buying

More room to breathe

Less bidding-war pressure than the peak years, more inventory to choose from, and rates a bit lower than last summer.

If you’re selling

A solid window

Well-prepared, correctly priced homes are still moving in about three weeks. Pricing discipline is doing the heavy lifting now.

If you own rentals

Protect occupancy

Rents are essentially flat, so the win is keeping good tenants, minimizing vacancy, and pricing to lease — not to wait.

Where the Chula Vista housing market stands

Chula Vista’s median sale price is sitting right around $800,000 — effectively unchanged from a year ago. The frenzy of 2021–2022 is well behind us, but there’s no sign of a slide either. What we’re seeing is normalization: more balanced inventory, realistic pricing, and steady demand rather than panic in either direction.

Buyer activity is actually a touch higher than last year, with more homes changing hands this spring than the same period in 2025. The catch is on the seller’s side: priced-to-market homes go quickly, while aspirational list prices sit and accumulate days on market. In a market like this, the comps and the prep matter more than ever.

Bonita & East Chula Vista note: Larger lots, newer Otay Ranch and Eastlake product, and Bonita’s semi-rural homes continue to command a premium over the citywide median. Neighborhood-level numbers can differ meaningfully from the city average — which is exactly why a tight set of recent local comps beats any headline figure.

Mortgage rates & the Fed

The 30-year fixed is averaging about 6.47%, down from roughly 6.8% at this time last year — a real, if modest, improvement in affordability. The 15-year fixed is near 5.8%. In June, the Federal Reserve held its benchmark rate steady and struck a cautious, inflation-watching tone, with some policymakers signaling rates could stay higher for longer. The practical takeaway: don’t expect a dramatic drop overnight. Buyers who find the right home are choosing to act now and revisit refinancing later if rates ease.

The rental side: steady, not soft

For owners and investors, the headline is stability. Chula Vista apartments average around $2,600 a month, with houses and larger units running higher (often $3,100+), and Otay Ranch sitting above the citywide average. Year over year, rents are essentially flat across the South Bay.

Flat rents don’t mean a weak market — demand is healthy and quality units lease quickly. But they do change the playbook. The owners who come out ahead this year are the ones who price to the current market rather than last year’s, keep turnover low through proactive renewals, and stay mindful of California’s rent-cap rules (the statewide limit is 5% plus regional inflation, capped at 10%) when setting increases. Small value-adds and fast, professional turnarounds are what protect your bottom line when rents aren’t climbing on their own.

So — what should you do?

Thinking of selling?

Find out what your home is actually worth in today’s market with a free, no-obligation valuation.

What’s My Home Worth?

Thinking of buying?

A balanced market favors prepared buyers. Get pre-approved and move with confidence.

Start the Buying Process

Own a rental?

See how full-service management keeps your units leased, compliant, and cash-flowing.

Explore Management

Want the numbers for your exact property?

Citywide averages only tell you so much. Let’s talk through your specific home, neighborhood, or rental — with real local comps.

Get in Touch

Kali Real Estate & Property Management

DRE #01778636 · Serving Chula Vista, Bonita, Otay Ranch, Eastlake & Imperial Beach · 619-651-0433 · db@kalirealestate.com

Market figures are as of mid-June 2026 and are compiled from public sources including Redfin, Zillow, Freddie Mac, and RentCafe. Numbers vary by source, neighborhood, and property type. This post is for general informational purposes only and does not constitute financial, tax, legal, or investment advice. Consult a qualified professional before making real estate decisions.

The 2/1 Buy Down Mortgage Explained

April 13, 2026 By Dario

2.99% Buy Down Mortgage Explained

Mortgage Education

The 2/1 Buy Down
Mortgage Explained

A seller-funded strategy that temporarily lowers your interest rate for the first two years — giving buyers immediate payment relief.

🏠

What is a 2/1 Buy Down?

A 2/1 Buy Down is a financing arrangement — typically paid by the seller or builder — where the borrower's interest rate is reduced by 2% in year one and 1% in year two, then settles at the permanent note rate starting year three. The full market rate applies for the life of the loan, but the early savings help buyers adjust to homeownership costs.

How It Works

Seller Funds Escrow

The seller deposits a lump sum into a buydown escrow account at closing.

Year 1 Rate Drops

Borrower pays 2% below the note rate. Escrow covers the difference.

Year 2 Rate Drops

Borrower pays 1% below note rate. Escrow continues to subsidize.

Year 3 Onward

Borrower pays the full permanent note rate for the remainder of the loan.

Rate Progression Example: 4.99% note rate

2.99%

Effective Rate

Yr 1

Year 1

−2% Buydown

3.99%