Buydown Calculator
Reduce your rate with upfront payment
Overview
The Buydown Calculator helps you understand the costs and benefits of mortgage rate buydowns. Whether you're considering a temporary buydown (2-1 or 3-2-1) or a permanent buydown through discount points, this calculator shows you the true cost versus monthly savings and break-even timeline.
Best Used For
Calculator Inputs
The calculator uses the following inputs to analyze buydown scenarios:
| Field | Description | Default |
|---|---|---|
| Loan Amount | Total mortgage loan amount | $400,000 |
| Base Rate | Standard interest rate without buydown | 7% |
| Loan Term | Loan term in years | 30 years |
| Buydown Type | Temporary (2-1, 3-2-1) or Permanent (points) | 2-1 |
| Discount Points | Points to purchase (for permanent buydown) | 1 point |
Calculator Outputs
The calculator provides detailed buydown analysis:
| Output | Description |
|---|---|
| Buydown Cost | Total upfront cost to fund the buydown |
| Monthly Savings | Payment reduction during buydown period |
| Total Savings | Cumulative payment savings over buydown period |
| Break-Even Point | Months until savings exceed cost (permanent) |
| Payment Schedule | Year-by-year payment breakdown |
| Effective Rate | Actual rate paid in each year of buydown |
How It Works
Buydown Types Explained
| Type | Year 1 | Year 2 | Year 3 | Year 4+ |
|---|---|---|---|---|
| 2-1 Buydown | −2% | −1% | Full Rate | Full Rate |
| 3-2-1 Buydown | −3% | −2% | −1% | Full Rate |
| 1-0 Buydown | −1% | Full Rate | Full Rate | Full Rate |
| Permanent (Points) | −0.25%* | −0.25%* | −0.25%* | Permanent |
*Per point purchased. 1 point = 1% of loan amount, typically reduces rate by 0.25%.
Buydown Cost Formula
Temporary Buydown Cost = Sum of monthly payment differences during buydown period
Permanent Buydown Cost = Points × Loan Amount (e.g., 1 point = $4,000 on $400K loan)
Example: 2-1 Buydown on 7% Rate
| Period | Rate | Monthly P&I* | Monthly Savings |
|---|---|---|---|
| Year 1 | 5.00% | $2,147 | $515/mo |
| Year 2 | 6.00% | $2,398 | $264/mo |
| Year 3+ | 7.00% | $2,662 | $0 |
*Based on $400,000 loan amount, 30-year term. Total 2-1 buydown cost: approximately $9,348.
Permanent vs Temporary Buydowns
| Feature | Temporary | Permanent |
|---|---|---|
| Rate Reduction Duration | 1-3 years | Entire loan term |
| Best For | Cash flow now | Long-term savings |
| Break-Even | Immediate benefit | ~4-6 years typical |
| Refinance Impact | Money saved if you refi | Lose benefit if you refi |
| Common Source | Seller concession | Buyer paid |
Seller Concessions
Key Considerations
Payment Shock
With temporary buydowns, be prepared for payment increases. Ensure you can afford the full payment when the buydown period ends.
Qualification Rate
Lenders qualify you at the full rate, not the buydown rate. You must be able to afford the payment after the buydown period.
Example Scenario
A buyer purchasing a $500,000 home with a $400,000 loan at 7% is offered a 2-1 buydown funded by seller concession:
Buydown Details
Cost & Savings
Explanation
The seller funds a $9,348 buydown account. In Year 1, the buyer pays $2,147/mo instead of $2,662/mo (saving $515/mo). In Year 2, they pay $2,398/mo (saving $264/mo). From Year 3 onward, they pay the full $2,662/mo. The buyer enjoys immediate cash flow relief while the full buydown cost equals the total savings.
Analyze buydown options
See how different buydown scenarios affect your payments and break-even point.
Try the Calculator