Compare 2-1 and 1-0 buydown scenarios using loan amount, term, rate, and fees.
Buydown Calculator
How to use this calculator
Enter the loan amount, base interest rate (the rate without buydown), the loan term, and the buydown structure you're being offered. Common structures are 2-1 (rate cut by 2% in year 1, 1% in year 2, then back to base in year 3+), 3-2-1, and permanent rate buydowns where the buyer or seller pays points to lower the rate for the life of the loan. The calculator returns year-by-year payments, the total cost of the buydown (paid upfront, usually by the seller as a concession), and the break-even point if you've paid for the buydown yourself. For temporary buydowns funded by the seller, the buyer's monthly savings are 100% gain — the question is just whether the seller would accept a lower offer instead, which is often the better trade for the buyer. For permanent buydowns funded by the buyer, run the math against your expected hold period to confirm the upfront cost recoups before you sell or refinance.
How the math works
Each year of a temporary buydown is calculated as a separate loan payment at the discounted rate. For a 2-1 buydown structure: Year 1 payment uses base rate − 2%; Year 2 uses base rate − 1%; Years 3 onward use the full base rate. The calculator solves the standard amortization formula at each discounted rate to produce year-by-year payments. Total buydown cost = sum of monthly payment differences across all discounted years. The seller (or buyer) funds this at closing into a buydown escrow, which then disburses monthly subsidies as the discounted payments are made. The escrow runs out at the end of the discount period and the loan reverts to its full base-rate payment. For a permanent buydown (paying points), each point reduces the rate by approximately 0.25% and costs 1% of the loan amount. Break-even = (cost in dollars) ÷ (monthly savings). The calculator computes both temporary and permanent buydown structures using whatever base rate you enter — pull current rates from the mortgage rates page when running scenarios.
When to use this vs the others
Use this calculator when you're being offered a buydown — typically by a seller or builder as a closing concession — and want to know whether the buydown is worth more than an equivalent dollar reduction in purchase price. Often it's not. A $9,000 buydown is often less valuable to the buyer than a $9,000 price reduction (which lowers the loan amount, lowers PMI, and persists for the life of the loan). Run both scenarios through the standard mortgage calculator to compare.
Frequently asked questions
Is a 2-1 buydown better than a price reduction?
Usually not. A $9,000 2-1 buydown gives you 24 months of lower payments, but the same $9,000 applied as a price reduction lowers your loan amount permanently. Over a 7+ year hold, the price reduction wins by thousands. Buydowns shine when sellers won't reduce price but will fund concessions.
What happens if I sell or refinance during the buydown years?
Any unused buydown funds in the escrow are returned — usually to the lender to pay down the loan balance, which slightly reduces your payoff amount. They don't go back to the seller and they don't go to the buyer as cash.
Are points the same as a buydown?
Different mechanisms with similar goals. Points are a permanent rate reduction — you pay 1% of the loan amount up front to drop the rate by ~0.25% for the life of the loan. A 2-1 or 3-2-1 buydown is a temporary rate reduction funded into an escrow that pays out over the first few years.
Can I do a buydown on an FHA or VA loan?
Yes — both FHA and VA permit temporary buydowns funded by the seller. The buyer must qualify at the post-buydown (full) rate, which can affect affordability. Permanent buydowns (points) are also available on FHA and VA at standard pricing.
Are buydown costs tax-deductible?
Permanent rate buydowns (points) paid by the buyer on a primary-residence purchase are typically deductible as mortgage interest in the year paid. Temporary buydown costs paid by the seller are not deductible by the buyer (they didn't pay them). Talk to your tax professional for specifics.