Buydown Calculator
Temporary Buydown Calculator
See what a 1-0, 1-1, 2-1 or 3-2-1 buydown costs, what you'd pay each year, and whether it fits within your seller concession limit.
This calculator provides estimates for educational purposes only and is not a commitment to lend or a rate quote. Payments shown are based on the rate you entered and may not reflect available rates. Seller concession limits depend on loan program, occupancy, loan-to-value, and the lesser of the sale price or appraised value, and individual lenders may apply stricter limits. Temporary buydowns are subject to lender approval and require a written buydown agreement. Justin Taylor, NMLS #2512284; Edge Home Finance, NMLS #891464.
How a temporary buydown works
A temporary buydown lowers your interest rate — and your payment — for the first one to three years of the loan. A 2-1 buydown, for example, drops the rate 2 points in year one and 1 point in year two, then the loan settles at its full note rate for the rest of the term.
The seller (or sometimes the builder or lender) pays for it. At closing, the cost goes into an escrow account, and each month that account covers the gap between your reduced payment and the full payment. You make the lower payment; the escrow makes up the rest.
Temporary buydown vs. permanent points. Discount points lower your rate for the life of the loan, while a temporary buydown only helps early on. A buydown makes the most sense when you want breathing room in the first years — or expect to refinance if rates drop.
Why ask for a buydown instead of a price cut? A $8,000 price reduction on a $400,000 home barely moves your payment. The same $8,000 as a buydown can save you hundreds a month in the first two years.
When the buydown ends, your payment rises to the full note-rate amount. That’s the payment you qualified with, so there’s no surprise — but budget for it from day one.
Worked example
A $400,000 home with 5% down is a $380,000 loan at 6.5%. With a 2-1 buydown, year one at 4.5% saves $476/month and year two at 5.5% saves $244/month. The total cost is about $8,649 — 2.2% of the price — which fits within the 3% limit for a conventional loan over 90% LTV.