Mortgage Buydown Calculator
A mortgage buydown lowers your payment by reducing the rate used to calculate it, either temporarily for the first one to three years or permanently for the life of the loan. Temporary buydowns are usually paid for by the seller or builder, which makes them one of the most negotiated concessions in the current market. This calculator handles both kinds: the temporary mode prices 3-2-1, 2-1, 1-1 and 1-0 structures with a year-by-year table and the exact subsidy cost, and the permanent mode prices discount points with a break-even month.
Principal and interest only. Taxes, insurance, HOA dues and mortgage insurance are never reduced by a buydown and are not included in any figure here.
Quick Answer
A 2-1 buydown on a $350,000 loan at 6.5% over 30 years cuts the payment from $2,212.24 to $1,773.40 in year 1 and $1,987.26 in year 2, and it costs exactly $7,965.79 to fund, the sum of the monthly differences. In permanent mode, paying $3,500 (1 point) to reach 6.25% saves $57.23 a month and breaks even at 61.2 months, so it only pays if you keep the loan past about 5.1 years.
Key takeaways
- A temporary buydown costs the exact sum of the payment differences it creates. There is no percentage shortcut, and any quote far from that sum deserves a question.
- Your note rate never changes in a temporary buydown. Only the rate used to calculate the early payments steps down, then back up.
- Points are a bet on time: divide the points cost by the monthly saving and you get the month you must outlast for the deal to win.
- Budget on the full note-rate payment from day one. The reduced years are breathing room, and the final step up is the payment shock to plan for.
- Quick Answer
- How to use the mortgage buydown calculator
- Two different products share one name
- The buydown formulas this calculator runs
- Worked example: a 2-1 buydown on $350,000 at 6.5%
- What each structure costs on the same loan
- Checking a quoted buydown cost
- When a buydown makes sense, and when it does not
- What competing calculators miss
- Frequently asked questions
- Add This Calculator to Your Website
- References
How to use the mortgage buydown calculator
Pick the mode that matches the offer in front of you, because the two modes answer different questions. Temporary mode asks what a stepped buydown costs to fund; permanent mode asks whether paying points wins over time.
- Choose the mode. Use Temporary buydown for a seller or builder offer with a step pattern, and Permanent buydown (points) when you would pay at closing to lower your own rate.
- Enter the loan as written. Loan amount, the note rate from the loan estimate, and the full term in years. In temporary mode, pick the buydown type that matches the offer: 3-2-1, 2-1, 1-1 or 1-0.
- Add a quoted cost if you have one. The temporary mode compares any quote against the subsidy the math requires and says plainly whether it is higher, lower, or in line.
- Read the subsidy, the table and the shock. The year-by-year table shows the effective rate, your payment and the savings each year. The payment shock line is the jump from the last reduced payment to the full payment, and it is the number to test against your budget.
- In permanent mode, read the break-even first. If your realistic stay is shorter than the break-even month, the points lose money no matter how good the new rate looks. A cost to refinance calculator runs the same break-even logic for a future refinance decision.
Two different products share one name
A temporary buydown and discount points both lower early payments, but they are not the same product and they are rarely paid for by the same person. Mixing them up is the most common mistake buyers make in this corner of a purchase.
In a temporary buydown, money is deposited into a buydown account at closing and drawn down monthly to top your reduced payment up to the full note-rate payment, a structure Fannie Mae’s temporary buydown guidance describes in detail, including the limits Fannie places on step size and duration for loans it buys. The note rate itself never moves. In a permanent buydown, you pay discount points at closing and the rate itself drops for the life of the loan, which the Consumer Financial Protection Bureau’s discount points explainer covers, including how points appear on the Loan Estimate.
Seller or builder commits the exact subsidy at closing.
Each month the account adds the difference to your reduced payment.
Your payment rises on schedule, 1 point a year in the standard patterns.
The account is empty and you pay the note-rate payment for the remaining term.
The buydown formulas this calculator runs
Every figure comes from one payment formula applied at different rates. Monthly payment = loan \u00d7 i \u00d7 (1 + i)n \u00f7 ((1 + i)n \u2212 1), where i is the annual rate divided by 12 and n is the term in months; at a zero rate the payment is simply loan \u00f7 n.
For a temporary buydown, the calculator prices the original loan amount over the full term at the note rate and at each stepped rate, then adds up the differences: subsidy = 12 \u00d7 (note payment \u2212 year 1 payment) + 12 \u00d7 (note payment \u2212 year 2 payment), and so on for three-year structures. That sum is the honest escrow deposit because it is, dollar for dollar, the money the account will pay out. Two details of the implementation deserve daylight. The stepped rate is never allowed below 0.1%, so on a very low note rate the floor, not the step pattern, sets the reduced payment. And the reduced payments are priced on the original amount and term each year, the standard funding method, rather than re-amortising the balance that remains when each step begins.
For permanent points, monthly saving = old payment \u2212 new payment, lifetime interest saved = monthly saving \u00d7 total months, and break-even months = points cost \u00f7 monthly saving. The lifetime figure is labelled interest saved because both loans repay the same principal over the same term, so the entire payment difference is interest. It is also a best case: it assumes you hold the loan for the full term, which is why the break-even month, not the lifetime figure, should drive the decision. Before comparing offers, sense-check the base payment itself in a mortgage payment calculator.
Worked example: a 2-1 buydown on $350,000 at 6.5%
Every number below reproduces exactly in the calculator with the pre-filled values. The note-rate payment on $350,000 over 30 years at 6.5% is $2,212.24 a month.
| Year | Effective rate | Your payment | Monthly savings | Annual savings |
|---|---|---|---|---|
| Year 1 | 4.500% | $1,773.40 | $438.84 | $5,266.07 |
| Year 2 | 5.500% | $1,987.26 | $224.98 | $2,699.72 |
| Year 3+ | 6.500% | $2,212.24 | $0.00 | $0.00 |
The subsidy is $5,266.07 + $2,699.72 = $7,965.79. That is the amount the builder must deposit at closing, and it is roughly 2.28% of the loan, not a round percentage anyone guessed. The payment shock is $224.98 a month, the step from the year 2 payment to the full payment in year 3. In permanent mode on the same loan, $3,500 of points moves the rate to 6.25% and the payment to $2,155.01, saving $57.23 a month, $20,602.04 across the full term, with break-even at 61.2 months (5.1 years). Sell or refinance before month 61 and those points cost more than they return.
What each structure costs on the same loan
Structure choice is a money choice: on identical loan terms, the four patterns on offer differ in funding cost by a factor of almost six. All four rows are this calculator’s own output for $350,000 at 6.5% over 30 years.
| Structure | Year 1 payment | Subsidy required | Share of loan |
|---|---|---|---|
| 3-2-1 | $1,571.66 | $15,652.77 | 4.47% |
| 2-1 | $1,773.40 | $7,965.79 | 2.28% |
| 1-1 | $1,987.26 | $5,399.44 | 1.54% |
| 1-0 | $1,987.26 | $2,699.72 | 0.77% |
The negotiation lesson sits in that spread. A seller offering a 1-0 while marketing it as a generous buydown concession is offering $2,699.72 of value on this loan, while a 2-1 from the same seller is worth $7,965.79. Ask which structure is on the table before you value the concession, and compare any buydown offer against the same dollars taken off the price, which lowers your payment for all 30 years rather than two.
Checking a quoted buydown cost
The quoted-cost field exists because buydown quotes are rarely checked. Enter the quote and the result line compares it with the required subsidy: a $9,000 quote on the worked example reads $1,034.21 higher than the $7,965.79 the math requires, with the advice to push back, while a $5,000 quote reads $2,965.79 lower, with the advice to confirm what the quote actually covers.
One rounding quirk is worth stating plainly: type the exact subsidy to the cent and the comparison can read “$0.00 LOWER” instead of an exact match, because the comparison runs on unrounded figures while the subsidy displays rounded to cents. A $0.00 difference in either direction is a match. What you are hunting for is a gap measured in hundreds or thousands, and those print exactly.
When a buydown makes sense, and when it does not
The honest answer depends on who pays and how long you keep the loan. The same structure can be close to free money in one deal and a poor buy in the next.
A buydown tends to work when
- The seller or builder funds the subsidy, so the early savings cost you nothing.
- Your income is likely to rise during the buydown years, meeting the stepping payment halfway.
- You expect to refinance if rates fall, and the unused escrow balance is credited back at payoff.
- You can already afford the full note-rate payment, so the steps up are a schedule, not a risk.
A buydown tends to fail when
- The full payment after the buydown ends strains your budget on current income.
- You would pay the whole subsidy yourself for only a year or two of relief.
- Points break even after the date you realistically expect to sell or refinance.
- The concession is a small structure, such as a 1-0, dressed up as a headline offer.
Qualification is the other reality check: lenders generally qualify you at the full note-rate payment, so a buydown seldom stretches the loan you can get, only the payments you make at the start. Test that full payment against your income with the mortgage allowance calculator, which applies the 28/36 guideline lenders start from, and weigh the wider approval picture in an approved mortgage calculator before treating a buydown offer as affordability.
What competing calculators miss
The top-ranking buydown tools were checked before this page was rebuilt, and the same gaps keep appearing. Each one below is something this calculator does that the rivals, as a group, do not.
- Only one structure. Several leading tools price a 2-1 and nothing else. A 3-2-1 costs almost twice as much to fund on the same loan, and a tool that cannot switch structures cannot price the offer you actually received.
- No quote check. No rival lets you enter the buydown cost you were quoted and judges it against the required subsidy. That single comparison is where overpricing hides, and it is built into the temporary mode here.
- No payment shock figure. The step from the last reduced payment to the full payment is the number that catches buyers off guard in year 3. Rivals show the early payments and leave the jump for you to subtract.
- Points handled in prose, not in a tool. Lender pages explain discount points at length, then give you no break-even month. The permanent mode here prices the same loan both ways and states the month the deal turns profitable.
- Approximate subsidy math. Some tools estimate buydown cost as a rough percentage of the loan. The subsidy is a sum of payment differences, and on this page it is computed as exactly that, to the cent.
Frequently asked questions
A 2-1 buydown lowers your effective mortgage rate by 2 percentage points in the first year and 1 point in the second year, then the rate returns to the original note rate in year 3. It is the most common temporary buydown structure, usually funded by the seller or builder. On a $350,000 loan at 6.5% over 30 years it costs $7,965.79 to fund.
A 3-2-1 buydown lowers the rate by 3 points in year 1, 2 points in year 2 and 1 point in year 3, then returns to the note rate in year 4. It gives the largest early savings of any common structure and costs the most to fund: $15,652.77 on the example loan used here. A 1-0 buydown lowers the rate by 1 point for the first year only, costs the least at $2,699.72 on the same loan, and is popular when a seller wants to offer a concession without a large escrow deposit.
Exactly the total of the monthly payment differences between the note-rate payment and the reduced payments over the buydown period, with each reduced payment priced on the original loan amount and term at that year’s stepped rate. For a 2-1 buydown on a $350,000 loan at 6.5%, that is $438.84 a month for 12 months plus $224.98 a month for 12 months, which is $7,965.79. The seller or builder deposits this amount in escrow at closing.
Usually the seller or the builder, as a negotiated concession, because the subsidy is a lump sum they can offer instead of cutting the price. Buyers can also pay for a buydown themselves, and lenders sometimes fund one from premium pricing, but when the borrower is footing the bill permanent discount points are generally the better buy because the savings last for the life of the loan.
No. A temporary buydown reduces payments for 1 to 3 years and the rate then returns to the note rate, while discount points permanently lower the rate for the entire loan term in exchange for a fee at closing, typically 1% of the loan per point. Use the permanent mode of this calculator to price points: $3,500 to move from 6.5% to 6.25% on the example loan saves $57.23 a month and breaks even at 61.2 months.
Yes. If you refinance or sell before the buydown ends, the unused buydown funds still sitting in the escrow account are typically credited toward your loan payoff under the buydown agreement, so you do not lose the remaining subsidy. Check your own agreement, because the treatment of leftover funds is set by that document rather than by a universal rule.
Generally yes. Lenders typically qualify you on the full note-rate payment, not the reduced buydown payment, so a buydown rarely helps you borrow more; it helps you pay less at the start. Confirm the rule with your lender, since guidelines vary by program, and check the payment against your income using the 28/36 guideline before you rely on the reduced years.
Yes, many government-backed loan programs allow temporary buydowns, including 2-1 structures, subject to program guidelines and limits on seller concessions. The funding math is identical: the subsidy is still the sum of the payment differences. What changes between programs is who may contribute the funds and how much an interested party is allowed to contribute toward the purchase.
Payment shock is the monthly payment increase when a buydown step ends, and the largest one usually lands when the buydown finishes. On the $350,000 example the payment jumps $224.98 a month from year 2 to year 3, from $1,987.26 to the full $2,212.24. Budget for the full note-rate payment from day one and treat the reduced years as breathing room, not as your real payment.
When you cannot comfortably afford the full payment after the buydown ends, when you are paying the full subsidy yourself in exchange for only a year or two of relief, or when permanent points never reach break-even before the date you expect to sell or refinance. A buydown funded by someone else is close to free money; a buydown you fund yourself has to win on the numbers in this calculator, not on the size of the first-year saving.
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References
- Consumer Financial Protection Bureau. What are discount points? Accessed October 22, 2026.
- Fannie Mae. Loan Delivery Job Aids: Overview of Temporary Buydown. Accessed October 22, 2026.
- Freddie Mac. Single-Family Seller/Servicer Guide, Section 4501.5: Temporary subsidy buydown plans. Accessed October 22, 2026.
- U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1. Accessed October 22, 2026.
- Consumer Financial Protection Bureau. What is a Loan Estimate? Accessed October 22, 2026.
- Consumer Financial Protection Bureau. What is the difference between a fixed-rate and adjustable-rate mortgage (ARM) loan? Accessed October 22, 2026.
- Consumer Financial Protection Bureau. Explore interest rates: Owning a Home. Accessed October 22, 2026.
- Freddie Mac. Primary Mortgage Market Survey: current average mortgage rates. Accessed October 22, 2026.
- Consumer Financial Protection Bureau. How do I get an estimate of my settlement charges? Accessed October 22, 2026.
- Consumer Financial Protection Bureau. FHA loans: Owning a Home. Accessed October 22, 2026.