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2-1 buydown calculator

See how a 2-1 temporary buydown changes your first two years of payments, and what it costs the seller or builder to fund it.

How much does a 2-1 buydown cost?

A 2-1 buydown costs the total of the payment savings it creates: 12 months of the difference between the note-rate payment and the payment at 2 points lower, plus 12 months at 1 point lower. The seller or builder usually deposits that amount at closing, so the cost depends on the loan amount, term and note rate.

Cost = 12 × (note-rate payment − payment at note rate minus 2) + 12 × (note-rate payment − payment at note rate minus 1)

Buydown estimate

Estimate 2-1 buydown payments and cost.

Enter the loan amount and the note rate you want to test. Nothing you type is sent or saved.

Estimated total buydown cost—

Estimates for illustration only, not a loan offer or rate quote. Principal and interest only unless you add taxes and insurance. Each payment is the full-term payment on the loan amount at that year’s rate. Lenders generally qualify you at the note rate, and buydown terms and seller-contribution limits vary by program.

Worked example

A $400,000, 30-year loan at a hypothetical 7% note rate, for illustration only. This is not a rate quote or a current rate.

  • Year 1 at 5%: $2,147.29 a month, saving $513.92 a month
  • Year 2 at 6%: $2,398.20 a month, saving $263.01 a month
  • Year 3 on at 7%: $2,661.21 a month, the full note-rate payment
  • Cost: 12 × $513.92 + 12 × $263.01 = $9,323.16, about 2.3% of the loan amount in this example

The buyer would still qualify at the 7% payment, and the payment rises to it in year 3. A different loan amount or rate gives a different cost, so use the calculator above with your own numbers.

Is a 2-1 buydown worth it?

It can help if you expect your income to rise or want breathing room in the first two years, and the seller is paying. Compare it with a price reduction or a closing cost credit of the same amount, since those can be worth more if you keep the loan a long time. See seller-paid rate buydowns in Florida for temporary vs. permanent buydowns and seller contribution limits.

FAQ

2-1 buydown questions

Who pays for a 2-1 buydown?

Usually the seller or builder, as a concession written into the purchase contract. The money is deposited at closing into an account that covers the difference in payments for the first two years. Seller-paid buydowns count toward the loan program's limit on seller contributions.

Do you qualify at the note rate or the bought-down rate?

For a temporary buydown, lenders generally qualify you at the full note rate, not the lower first-year rate. That means a 2-1 buydown lowers your early payments but does not increase how much you can borrow.

What is the difference between a 2-1 buydown and a permanent buydown?

A 2-1 buydown is temporary: the rate is 2 points lower in year 1 and 1 point lower in year 2, then it returns to the note rate for the rest of the loan. A permanent buydown uses discount points paid at closing to lower the rate for the life of the loan.

How is the cost of a 2-1 buydown calculated?

Add up the monthly savings: 12 months of the difference between the note-rate payment and the payment at 2 points lower, plus 12 months of the difference at 1 point lower. That total is what has to be deposited at closing.

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

Unused buydown funds are handled under the loan program and servicer rules, often applied toward your loan balance. Ask how it works for your specific loan before you close.

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