2-1 Buydown Calculator
A temporary buydown lowers your payment for the first year or two of the loan — usually paid for by the seller, not you. See exactly what your payment looks like each year, what the buydown costs, and how it compares to negotiating a lower price instead.
In short: a 2-1 buydown cuts your rate by 2% in year one and 1% in year two, then the full rate kicks in. The upfront cost equals your total savings, and when the seller pays it, you get the lower payments for free.
2-1: rate is 2% lower in year 1, 1% lower in year 2. 3-2-1: 3%, 2%, then 1% lower. 1-0: 1% lower in year 1 only.
Year 1 Monthly Payment (P&I)
$2,087
at 4.75% instead of 6.75%
Year-by-Year Payment Schedule
Total Buydown Cost
$9,216
Your Total Savings
$9,216
Buydown vs. Price Reduction
How a Temporary Buydown Actually Works
Buydowns get pitched hard whenever rates are high. Here's what's really happening — and when the math works in your favor.
The mechanics — it's prepaid savings, not a different loan
Your actual loan never changes: same note rate, same term, same amortization. What changes is who pays the monthly bill. The full cost of the buydown — the exact difference between the reduced payments and the full payment — is deposited into an escrow account at closing. Each month during the buydown period, you pay the reduced amount and the escrow account contributes the rest. That's why the "total buydown cost" and "your total savings" numbers above are identical: it's a dollar-for-dollar subsidy, funded upfront.
Who pays matters — a lot
When the seller or builder funds the buydown as a closing concession, you're getting lower payments at zero cost to you — it's one of the strongest concessions you can negotiate in a buyer's market. When you fund it yourself, the calculus flips: you're just prepaying your own mortgage payments, and that same cash usually works harder as discount points (a permanent rate reduction) or a bigger down payment. As a rule of thumb: seller-paid buydown, usually yes; borrower-paid buydown, usually look at points instead.
Buydown vs. price reduction — the negotiation math
Here's the counterintuitive part: a seller credit spent on a buydown lowers your payment far more than the same amount taken off the purchase price. Knock $10,000 off a $500,000 price and your payment drops by roughly $60–65 a month. Put that same $10,000 into a 2-1 buydown and your payment drops by roughly $500 a month in year one. If monthly cash flow is what matters — and for most buyers it is — the buydown is the better ask. The price cut only wins if you're optimizing long-term equity and plan to hold the loan for decades without refinancing.
You qualify at the full rate — by design
Lenders underwrite you at the permanent note rate, not the teaser-year rate. That's a feature, not a bug: it means the loan is safe for you even after the subsidy ends. A buydown should never be the thing that makes a house "affordable" — it's breathing room for the first year or two while you settle in, furnish the place, or wait out a possible refinance window.
The refinance angle — why buydowns are low-risk
If rates drop during your buydown period and you refinance, the unused money in the buydown escrow doesn't vanish — it's credited toward your loan payoff. That makes a seller-paid buydown a remarkably asymmetric bet: rates stay high, you enjoy the subsidized payments; rates fall, you refinance and pocket the leftover subsidy as a payoff credit. Either way, you come out ahead of where you'd be without it.
Frequently asked questions
What is a 2-1 buydown?
A 2-1 buydown temporarily lowers your mortgage rate by 2% in the first year and 1% in the second year. Starting in year three, you pay the full note rate for the rest of the loan. The difference between the reduced payments and the full payment is funded upfront — usually by the seller or builder — and held in an escrow account that subsidizes your payment each month.
Who pays for a temporary buydown?
Most of the time, the seller or builder pays for it as a concession to close the deal — that's why it's often called a seller-paid buydown. The cost comes out of their proceeds at closing, not your pocket. Borrower-paid buydowns exist but are less common, since paying points for a permanent rate reduction is usually a better use of your own money.
Do I qualify at the lower rate or the full rate?
You qualify at the full note rate, not the temporary first-year rate. Lenders underwrite the loan as if the buydown didn't exist, which protects you from a payment you can't afford once the buydown period ends. The lower early payments are breathing room, not a qualification trick.
What happens to the buydown money if I refinance or sell early?
Any unused funds left in the buydown escrow account are typically credited toward your loan payoff when you refinance or sell. You don't lose the money — which is why a seller-paid buydown is low-risk: if rates drop and you refinance in year one, the remaining subsidy reduces what you owe.
More calculators
This calculator is for educational and estimation purposes only. It does not constitute a loan offer, pre-approval, or commitment to lend. Buydown availability varies by loan program and lender.