Temporary Buydown Calculator

A 2-1 buydown lowers your interest rate, temporarily, for the first two years of your loan. In year one, your rate is reduced by 2%. In year two, its reduced by 1%. After that, it adjusts back to your full note rate for the rest of the loan term. The difference in payment is usually covered through seller or builder concessions. Compare the all-in cost against today's mortgage rates before deciding whether a buydown or a permanent rate is the better deal.

In most cases, the seller, builder, or sometimes the lender funds the buydown upfront by placing money into an escrow account at closing. Each month, a portion of that account is used to offest the difference between your reduced payment and your actual payment

If the home you own, you either sell or refinance before the buydown runs out, any remaining funds in that escrow account are applied toward your loan balance, reducing what you owe. If you do refinance into a permanent lower rate, the math on whether to buy down further is the same as points in a refinance — and you can run the breakeven on our discount points calculator.

Whils its technically possible, many loan programs require that the buydown be funded by a third party involved in the transaction, like the seller, builder, or lender, not directly from your own funds. The exact rules differ across conventional loan, FHA loan, and VA loan programs, so confirm with your loan officer before you write the offer. You can also stress-test the post-buydown payment with our home affordability calculator to make sure year three still fits your budget.