Free Mortgage Buydown Calculator
Estimate your savings from a temporary interest rate buydown. Compare 3-2-1, 2-1, 1-1, and 1-0 buydowns in seconds.
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Free Mortgage Buydown Calculator: Save on Your Home Loan
Estimate Your Savings with Our Simple Buydown Tool
Discover how a mortgage buydown can lower your interest rate and monthly payments with our free Mortgage Buydown Calculator. Designed for first-time homebuyers, refinancers, and investors, this tool provides clear insights into potential savings over your loan's lifetime. Start saving today!
Why Choose a Mortgage Buydown Calculator?
A mortgage buydown reduces your interest rate upfront, making homeownership more affordable or lowering your current mortgage costs. Our calculator helps you:
- Maximize Savings: See immediate and long-term reductions in monthly payments and total interest.
- Weigh Costs vs. Benefits: Compare upfront buydown fees with lifetime savings.
- Tailor Your Plan: Explore custom buydown scenarios based on your loan details.
How Our Buydown Calculator Works
- Input Loan Details: Enter your loan amount, term, and current interest rate.
- Select a Buydown: Choose options like a 3-2-1 or 2-1 buydown to see the impact.
- Get Results: Instantly view your new monthly payments and total savings.
Top Benefits of a Mortgage Buydown
- Reduced Payments: Lower monthly costs for better budget management.
- Greater Affordability: Qualify for your dream home with a lower rate.
- Interest Savings: Keep more money over the life of your mortgage.
Worked Example: 2-1 Buydown on a $400,000 Loan
Suppose you are taking out a $400,000 30-year fixed mortgage at a note rate of 6.5%, and the seller agrees to pay for a 2-1 buydown. Here is how your rate and payment would change during the buydown period:
| Year | Rate | Monthly Payment | Monthly Savings |
|---|---|---|---|
| Year 1 | 4.5% | $2,026.74 | $477.92 |
| Year 2 | 5.5% | $2,271.16 | $233.50 |
| Year 3+ | 6.5% | $2,528.27 | $0.00 |
Over the two-year buydown period you would save roughly $8,537 in monthly payments. The seller pays this cost upfront at closing as a concession, so your out-of-pocket cash is not affected. After year 2, your payment adjusts up to the full note rate for the remaining 28 years of the loan.
Buydown Types Compared
Different buydown structures lower your rate by different amounts and for different lengths of time. Here is a side-by-side comparison of the four buydown types this calculator supports, all assuming a 6.5% note rate:
| Type | Year 1 Rate | Year 2 Rate | Year 3 Rate | Years Reduced |
|---|---|---|---|---|
| 3-2-1 | 3.5% | 4.5% | 5.5% | 3 |
| 2-1 | 4.5% | 5.5% | 6.5% | 2 |
| 1-1 | 5.5% | 5.5% | 6.5% | 2 |
| 1-0 | 5.5% | 6.5% | 6.5% | 1 |
The deeper the buydown (3-2-1), the more you save per month but the more it costs upfront. A 2-1 buydown is the most common structure in today's market because it balances meaningful first-year savings with a lower upfront cost than a 3-2-1.
Mortgage Buydown Glossary
- Note rate
- The permanent interest rate on your mortgage, after any temporary buydown period ends. This is the rate used to qualify for the loan.
- Buydown cost
- The upfront fee paid to lower the rate during the buydown period. It equals the total savings the borrower receives during the reduced-rate years. It is often paid by the seller, builder, or lender as a concession.
- Seller concession
- A credit from the seller to the buyer at closing, used to cover closing costs or fund a buydown. Sellers offer concessions to make a sale happen in a slow market.
- Permanent buydown
- Paying discount points to lower the rate for the entire life of the loan, not just the first few years. See our points calculator to compare.
- Qualifying rate
- The rate lenders use to determine if you can afford the loan. For most temporary buydowns, lenders qualify you at the note rate (the higher post-buydown rate), not the reduced introductory rate.
Frequently Asked Questions
What is a mortgage buydown?
A mortgage buydown is when a borrower (or seller/builder) pays an upfront fee to temporarily or permanently reduce the interest rate on a mortgage, leading to lower monthly payments during the buydown period.
How does a 3-2-1 buydown work?
A 3-2-1 buydown lowers the interest rate by 3 percentage points in year 1, 2 points in year 2, and 1 point in year 3. In year 4 the rate returns to the note rate for the remainder of the loan.
How does a 2-1 buydown work?
A 2-1 buydown reduces the interest rate by 2 percentage points in year 1 and 1 point in year 2. From year 3 on, the borrower pays the full note rate.
Who pays for a mortgage buydown?
Buydowns are often funded by the seller, builder, or lender as a concession to help a buyer qualify or afford the home. Borrowers can also pay for a buydown themselves if it makes financial sense.
Is a mortgage buydown worth it?
It depends on how long you plan to stay in the home, the upfront cost of the buydown, and your monthly savings. Our calculator compares the upfront fee against the lifetime savings so you can decide.
Can I use a mortgage buydown when refinancing?
Yes. Buydowns can be used on both purchases and refinances. The calculator works the same way for either scenario.
What buydown types does this calculator support?
The calculator supports 3-2-1, 2-1, 1-1, and 1-0 buydown structures. Each shows the reduced rate, monthly payment, and savings for each year of the buydown period.
Does a mortgage buydown affect my credit score?
No. A buydown is a one-time upfront payment that lowers the interest rate; it is not a credit agreement and does not directly affect your credit score.
Disclaimer
This Mortgage Buydown Calculator is an educational tool for estimating savings and understanding the mortgage process. Results are approximations and exclude taxes, insurance, or other fees, which may increase actual payments. This is not an offer or guarantee of credit. For accurate quotes, consult a licensed loan officer.
By using this site, you consent to data collection via Google Analytics.
Example: A 3-2-1 buydown on a $225,000 home (20% down, 30-year fixed, 6.673% APR, $3,320.80 in fees) starts at 3.5% ($808.28/month) in year 1, rises to 4.5% ($912.03/month) in year 2, 5.5% ($1,022.02/month) in year 3, then 6.5% ($1,137.72/month) with 0.107 points ($192.60) at closing. Rates as of 1/30/23; subject to change. Assumes a 760 credit score. Approval depends on income, property, and credit checks. Seller/builder must fund buydown costs. Some loans may not allow buydowns; restrictions apply.
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