Financing tool
The temporary buydown, illustrated.
Quick answer
A temporary buydown lowers the buyer's rate for the first year or two (2% then 1% on a 2-1), then returns to the note rate. It's usually a seller or builder credit, and it often costs far less than an equivalent price cut.
Pick a buydown type, enter the loan, rate, and term, and see the subsidized payment, the monthly savings, the total subsidy, and the cost in loan points. Drag the numbers below.
A 2-1 lowers your rate 2% the first year and 1% the second, then it returns to the full rate. 1-0 is one year; 3-2-1 is three.
$2,850.10/mo
$3,193.81/mo
Total buydown cost · 2-1
$12,802
About 2.28 points. Usually paid by the seller or builder and held in escrow.
Your payment, year 1
$2,850.10/mo
vs $3,555.38/mo at the full rate
Estimate only. The qualifying rate defaults to today's average from our live rate feed for a well-qualified buyer with 25% down; edit it to match your scenario. Principal & interest at the rates shown; excludes taxes, insurance, HOA, and MI. A temporary buydown lowers the rate for the first 2 years; the loan is underwritten at the full qualifying rate, and the subsidy cannot exceed the maximum interested-party contributions for the product. Informational only · not a commitment to lend · rates and terms subject to change.
When a buydown wins
- A seller wants to move a listing without dropping the price. A buydown credit gives buyers a bigger early-payment break per dollar.
- A buyer expects income to rise, or plans to refinance when rates ease. The temporary relief bridges the gap.
- Competing offers: a buydown credit can out-feel a small price reduction in the buyer's monthly reality.
Common questions
What is a 2-1 buydown?
A temporary rate reduction. The rate is 2% lower in year one and 1% lower in year two, then returns to the full note rate for the rest of the loan.
Who pays for a buydown?
Usually the seller or builder, as a credit held in escrow. It is often cheaper than an equivalent price cut and gives the buyer a bigger early-payment break per dollar.
How much does a 2-1 buydown cost?
The cost equals the total payment savings across years one and two. On a $775,000 loan at 6.375%, it is about $17,500, or roughly 2.26 points. Use the calculator to run your own numbers.
Does the buyer still qualify at the lower rate?
No. The loan is underwritten at the full note rate, so the buyer qualifies on the real long-term payment.
What is the difference between 1-0, 2-1, and 3-2-1?
They set how many years the rate is reduced and by how much. 1-0 lowers year one by 1%. 2-1 lowers year one by 2% and year two by 1%. 3-2-1 lowers years one, two, and three by 3%, 2%, and 1%.