Free Investor Tool
2-1 Buydown Calculator
Year-by-year payments on a temporary buydown, and the exact seller concession that funds it.
Your numbers
$
%
Results
Full payment (7.000%)
$3,327Principal & interest, after the buydown period
Year 1 payment (5.000%)
$2,684Saves $642/mo · $7,709/yr
Year 2 payment (6.000%)
$2,998Saves $329/mo · $3,945/yr
Buydown cost (seller concession)
$11,654Total payment shortfall deposited at closing
That's 2.3% of the loan amount — compare it against an equivalent price reduction before you negotiate.
How this works. A temporary buydown escrows the difference between the full payment and the reduced payments for the buydown years. The payment at each step is computed on the full loan amount at the reduced rate; the total shortfall is what the seller (or builder) deposits at closing. The loan's actual note rate never changes — if rates fall, you can still refinance.
FAQ
- What is a 2-1 buydown?
- A temporary rate buydown where the buyer's effective rate is 2 points lower in year one and 1 point lower in year two, then reverts to the full note rate. The difference between the reduced payments and the full payment is deposited up front — usually by the seller or builder as a concession — and drawn down each month.
- Who pays for a 2-1 buydown?
- Usually the seller or builder, as a closing concession negotiated in the purchase contract. The cost equals the total payment shortfall over the buydown period, so it's a fixed, calculable number — not a percentage guess. Lenders generally do not allow the buyer to fund their own temporary buydown.
- Is a 2-1 buydown better than a price cut?
- It depends on the numbers. A buydown concentrates the seller's money in the buyer's first two years of payments, which helps buyers who are payment-constrained today and plan to refinance if rates fall. A price cut lowers the loan balance forever. Run both against your hold plan — for short expected holds, the buydown often delivers more relief per seller dollar.
- Do investors qualify for temporary buydowns?
- Many retail lenders restrict temporary buydowns to owner-occupants or cap seller concessions on investment property at 2%, which can kill the structure. Specialty and broker-channel lenders can often structure buydowns on investor loans where the concession math works — it's a lender-selection question as much as a deal question.