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Mortgage Buydown Calculator

A temporary buydown lowers your mortgage payment for the first one to three years: a 2-1 buydown cuts the rate by 2 points in year 1 and 1 point in year 2, a 3-2-1 by 3, 2 and 1 points, and a 1-0 by 1 point in year 1 only, after which you pay the full note rate. Enter the loan amount, note rate and term to see the payment in each year, the total cost of the buydown (the subsidy a seller, builder or lender puts in escrow), and how a permanent buydown with discount points compares.

Buydown plan
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The permanent rate on your note. The buydown only lowers the payment, not this rate.

For the comparison. One point is 1% of the loan amount, paid at closing.

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Varies by lender and market. Use the figure on your Loan Estimate.

Year 1 payment with the 2-1 buydown$2,027At 4.5% instead of 6.5%. Then $2,271 in year 2, $2,528 from year 3 on. The buydown costs $9,104.
  • Year 1 subsidy$6,018
  • Year 2 subsidy$3,085
Payment at the note rate (6.5%)
$2,528
Year 1 at 4.5%: payment, saving
$2,027, $502 a month
Year 2 at 5.5%: payment, saving
$2,271, $257 a month
Total buydown cost (escrowed subsidy)
$9,104
As a share of the loan
2.28%
Instead: 1 point for a permanent rate of 6.25%
Cost of the points
$4,000
Payment for the whole term
$2,463 ($65 a month less)
Points paid back after
62 months
Saving in the first 2 years: temporary vs permanent
$9,104 vs $1,570
Permanent saving over the full term, after the points
$19,545

Lenders qualify you at the full note rate, not the bought-down rate, under Fannie Mae and Freddie Mac rules. Who pays the buydown, and whether it counts against seller-concession limits, depends on your deal.

How a 2-1 buydown works

The note rate never changes. Your loan is written and amortizes at, say, 6.5%, and a buydown account funded at closing pays part of each payment for the buydown years. Under Fannie Mae's Selling Guide (B2-1.4-04), the rate reduction cannot exceed 3 percentage points, the rate can step up by no more than 1 point a year, the plan cannot run longer than 3 years, and the funds must sit in a custodial account, fully funded before the loan is delivered. Freddie Mac's rules match on the 3-point and 3-year limits. Both require the lender to qualify you at the full note rate, so the buydown does not help you borrow more.

Worked example: $400,000 at 6.5% for 30 years is $2,528 a month. With a 2-1 buydown the year 1 payment is figured at 4.5%, which is $2,027, and year 2 at 5.5%, which is $2,271. The buydown account pays the difference: $502 a month in year 1 and $257 a month in year 2, a total of $9,104, about 2.3% of the loan. From year 3 you pay $2,528. The same loan with a 3-2-1 buydown costs $17,889 to fund; a 1-0 costs $3,085.

Temporary buydown vs permanent buydown with points

Discount points lower the rate for the whole term. The CFPB explains that one point costs 1% of the loan amount and that how much it lowers the rate varies by lender, loan type and the market, so use the figure on your own Loan Estimate. If one point ($4,000) buys a quarter point off, the $400,000 loan at 6.25% is $2,463 a month, $65 less than at 6.5%, and the point pays for itself after 62 months.

$400,000, 30 years, 6.5% note rateUp-front costYear 1 paymentYear 3 onwardSaving over 30 years, after the cost
No buydown$0$2,528$2,528$0
2-1 temporary buydown$9,104$2,027$2,528$0 (the subsidy is spent in two years)
1 point, rate 6.25%$4,000$2,463$2,463$19,545

A temporary buydown is worth more in the first two years and nothing after; points are worth less per month but keep paying as long as you hold the loan. Who writes the check matters too: if a seller is paying, Fannie Mae counts a seller-funded buydown toward its interested-party contribution caps of 3%, 6% or 9% of the price depending on the down payment (B3-4.1-02), so the buydown may use up concessions you could have spent on closing costs. If you expect to refinance within two or three years, the temporary plan usually wins; if you plan to stay, compare the points and the saving per month in the calculator. If you later get a lump sum, a recast can lower the full-rate payment too.

Questions

How much does a 2-1 buydown cost?

The sum of the payment reductions over the two years. On a $400,000 30-year loan at 6.5% it is about $9,104, roughly 2.3% of the loan amount; the exact figure depends on the rate and loan size.

Who pays for a temporary buydown?

Usually the seller, a builder or the lender, under a written buydown agreement, though a borrower may fund one too. Seller-paid buydowns count toward Fannie Mae's interested-party contribution limits.

Does a 2-1 buydown change my interest rate?

No. The note rate and the loan's amortization stay the same; the buydown funds pay part of your payment for the buydown years, and the mortgage documents show the permanent terms.

Do I qualify at the lower buydown rate?

No. Fannie Mae and Freddie Mac require lenders to qualify you at the full note rate without considering the bought-down rate.

What happens to the buydown money if I refinance or sell early?

It depends on the buydown agreement. Fannie Mae allows the agreement to return unused funds to the borrower, or to the lender if the lender funded it, when the loan is paid off early. Read your agreement.

Is a temporary buydown better than discount points?

A temporary buydown saves more in the first one to three years and then stops; points save less per month but for the whole term. The longer you keep the loan, the more points win.

What is a 3-2-1 buydown?

A three-year plan where the payment is figured at 3 points below the note rate in year 1, 2 points in year 2 and 1 point in year 3. It is the most expensive plan to fund, about $17,900 on a $400,000 loan at 6.5%.

Sources

Updated November 3, 2026. Estimates only, not tax or financial advice.

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