2-1 & 1-0 rate buydown calculator

The one thing to budget around

A 2-1 or 1-0 buydown only discounts your rate temporarily — your loan balance and permanent rate never change, and by year 3 (2-1) or year 2 (1-0) you're paying the full permanent payment shown above. Qualify and budget against that permanent number, not the discounted year-one payment.

Since these are usually funded by a seller or builder as a closing incentive rather than paid by you, they're close to free money — as long as the cost isn't quietly built into a higher purchase price elsewhere in the deal.

Read the full guide: 2-1 Buydown Explained: How Temporary Rate Buydowns Work →

Somebody pays for the buydown, and it usually isn't the lender

A temporary buydown works by putting money in an escrow account up front, which is drawn down each month to cover the difference between your reduced payment and the payment the loan actually requires. The loan itself never changes. The subsidy comes out of a pot that someone funded at closing.

In most transactions that someone is the seller, as a concession — which means it came out of the negotiation. A seller offering a 2-1 buydown is offering you a specific amount of money in a specific form. The question worth asking is whether you'd rather have it as a price reduction instead.

A price cut lowers your loan balance permanently and reduces your payment for the entire term. A buydown lowers your payment substantially for a year or two and then stops. Neither is universally better, but they are not equivalent, and the buydown is the one that gets marketed harder.

Three products that get called the same thing

The temporary products and the permanent one solve different problems. A buydown is a bridge — it makes the first year or two affordable on the expectation that something changes, usually rates falling enough to refinance or income rising. Discount points are a long-horizon purchase: you pay now to save monthly for as long as you keep the loan, and they only pay off if you stay past the breakeven.

You qualify at the full rate, not the reduced one

This is the detail that catches buyers, and it's worth being blunt about. Underwriting evaluates your ability to repay at the note rate — the rate you'll actually pay in year three — not at the temporarily reduced payment. A buydown does not help you qualify for a larger loan.

The reason this matters is behavioral rather than technical. If the year-one payment is what you budget around, the step up in year three arrives as a shock even though it was disclosed at closing. A buydown is a good fit for someone who can afford the full payment today and would simply prefer lower payments while furnishing a house or absorbing moving costs. It's a poor fit for someone who needs the reduced payment to make the numbers work.

Selling or refinancing early changes the math

Because the buydown funds sit in escrow, unused money doesn't simply vanish if you exit early. If you refinance or sell before the subsidy period ends, the remaining balance is typically applied to your loan payoff.

That's a genuinely favorable structure and it's underappreciated. It means a buydown carries less downside risk than discount points, where an early refinance means the money you paid to lower your rate is gone. If there's a real chance you'll refinance within two years, the temporary buydown is the more forgiving of the two.

The mirror image is also true. If you're confident you'll hold the loan for a decade, points do more for you than a buydown ever will — the buydown's benefit is over in twenty-four months, while points keep paying for as long as you keep the loan.