Buydown Calculator
See how a temporary rate buydown lowers your payment during the first years of your loan, and what it costs up front.
How a Temporary Buydown Works
A temporary buydown lowers your payment for the first one to three years of the loan. In a 2-1 buydown, your payment is calculated at 2% below your note rate in year one and 1% below in year two, then moves to the full rate for the rest of the loan. The difference is paid up front into an account that makes up the shortfall each month.
Buydowns are most often paid by the seller or builder as a concession. Enter your loan amount, rate, and buydown type to see the payment in each year and the total cost. You still have to qualify at the full note rate, so a buydown eases the early payments but does not increase the amount you can borrow.
Example: On a $500,000 loan at 6.5%, the regular payment is about $3,160. With a 2-1 buydown, the payment is about $2,533 in year one and $2,839 in year two. The cost of the buydown is roughly $11,400.
Common Questions
Who pays for a temporary buydown?
Usually the seller or builder, as part of the purchase negotiation. A buyer or lender can also fund it.
What happens if I refinance or sell before the buydown ends?
Unused buydown funds are typically applied to your loan balance at payoff. Confirm the terms with your lender.
Is a buydown better than a price reduction?
A buydown gives you more relief in the first years, while a lower price reduces the payment slightly for the whole loan. A third choice is to use the same money for discount points and lower the rate permanently.