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If I pay for the business plan on wordpress.com JUST so custom templates can be used to build a website and then downgrade after the website is built, will my website still be hosted/active? I'm confused what I'm paying for. My website will barely be used so I don't want to pay $25/mo indefinitely. It seems like hosting is free? I bought my domain from another site and transferred it over.

Don’t use WordPress.com hosting. You can get much cheaper, without restricted wp features, hosting at many other hosts.
Contact WordPress.com sales. This is for the CMS itself.
You can get affordable hosting with Nixihost and install WordPress.org. Their basic plan is budget-friendly and includes 1 domain, unlimited free email addresses, and free SSL. You only pay the monthly hosting fee—no setup or extra fees.