2-1 Buydown Calculator
Compare temporary payments and upfront funding for 1-0, 1-1, 2-1, and 3-2-1 buydowns.
How does a temporary mortgage buydown work?
A temporary buydown uses money set aside upfront to cover part of your scheduled mortgage payment for a limited time. Your note rate stays the same. The subsidy fills the gap between what you pay and the full principal and interest payment due.
Think of it as some breathing room at the beginning, with a payment increase you can plan for. It does not erase the full payment or guarantee that you can refinance before it arrives.
How to use this calculator
Enter your purchase price, down payment, full note rate, and loan term. Add your monthly taxes, insurance, mortgage insurance, and HOA dues. Then toggle between the four plans. Your numbers stay in place so you can compare without starting over.
The loan amount is your purchase price minus your down payment. Each payment level uses that original balance and the full loan term. Funding equals the monthly principal and interest difference multiplied by the number of months it applies. It is a subsidy estimate, not your total closing costs or lifetime interest savings.
Compare the four buydown structures
The numbers describe percentage point reductions used to calculate your temporary payment. They do not change your actual note rate. Availability depends on your lender and program.
| Plan | Year 1 | Year 2 | Year 3 | Full payment starts |
|---|---|---|---|---|
| 1-0 buydown | 1 point lower | Full payment | Full payment | Month 13 |
| 1-1 buydown | 1 point lower | 1 point lower | Full payment | Month 25 |
| 2-1 buydown | 2 points lower | 1 point lower | Full payment | Month 25 |
| 3-2-1 buydown | 3 points lower | 2 points lower | 1 point lower | Month 37 |
A worked 2-1 buydown example
Illustration only, not a current rate quote or loan offer. Assume a $450,000 purchase, $90,000 down payment, and a $360,000 fixed rate loan over 30 years. The hypothetical note rate is 6.75%. This is an interest rate, not an APR; an APR requires the actual loan fees and terms.
The scheduled principal and interest payment is $2,334.95 per month. Here is the borrower’s portion with a 2-1 buydown:
- Months 1 through 12: $1,877.93 per month, calculated at 4.75%. The subsidy covers $457.02 each month.
- Months 13 through 24: $2,100.86 per month, calculated at 5.75%. The subsidy covers $234.09 each month.
- Months 25 through 360: the full $2,334.95 principal and interest payment.
Estimated funding: ($457.02 × 12) + ($234.09 × 12) = $8,293.32. That is money needed upfront to support the lower payments, separate from the down payment and other closing costs.
Add illustrative taxes of $350 and homeowners insurance of $150 per month, with no mortgage insurance or HOA dues assumed, and the estimated housing payments become $2,377.93, $2,600.86, and $2,834.95. Actual taxes and insurance can change. Mortgage insurance, HOA dues, flood coverage, and other applicable costs would increase these amounts.
What changes with the other options?
Using that same loan and hypothetical rate, a 1-0 buydown needs about $2,809.08 in subsidy funding. A 1-1 buydown needs $5,618.16, because the same $234.09 monthly difference lasts for 24 months.
A 3-2-1 buydown begins with principal and interest of $1,667.22, calculated at 3.75%, then steps to $1,877.93 and $2,100.86 before the full $2,334.95 payment begins in month 37. Its estimated funding is $16,306.08. A bigger initial reduction takes more money upfront. That is worth comparing against other uses of an available credit.
Who pays for a buydown?
A seller, builder, or lender may fund the subsidy, subject to program rules. Seller and builder contributions are subject to applicable limits. A lender credit may involve different pricing. Ask for the full cost comparison, not just the smaller first payment.
Which payment do you qualify with?
For Fannie Mae loans, qualification uses the note rate, not the temporary reduced payment. Other program requirements need to be checked. My budgeting advice is to look at the full payment too. A smaller payment today should not be the only reason the numbers work.
Use the home affordability calculator to explore your budget, or read why qualifying and comfortably affording can be different.
Temporary buydown questions, answered
Is a 2-1 buydown the same as an adjustable rate mortgage?
No. This calculator assumes a fixed rate loan. The borrower’s contribution changes when the subsidy steps down, while the note rate remains fixed. An adjustable rate mortgage has separate rules for changes to its actual interest rate.
Can I use this as a 1-0 or 1-1 buydown calculator?
Yes. Select 1-0 for one year of payments calculated one percentage point below the note rate. Select 1-1 for that same reduction in both of the first two years. The tool updates the payment schedule and funding estimate.
How do I use the 3-2-1 buydown calculator?
Select 3-2-1 above. The payment calculation rate steps from three points below the note rate to two, then one. The full payment starts in year four. The entered note rate must be at least 3% so the example does not use a negative payment calculation rate.
What happens if I refinance or sell early?
Unused subsidy funds are handled under your buydown agreement and program rules. For Fannie Mae loans, payoff funds may reduce the payoff or be returned as the agreement permits. Do not assume you will receive cash back.
Does a buydown reduce my taxes or insurance?
No. The subsidy shown here applies only to principal and interest. Other costs are added separately and held constant for comparison. Your actual escrow payment can change.
Is this the same as paying discount points?
No. This tool estimates a temporary payment subsidy. Discount points involve upfront costs for a lower note rate. Compare the upfront cost, monthly payment, and how long you expect to keep the loan before choosing.
Is a temporary buydown worth it?
It depends on the cost and your alternatives. I would compare the same purchase with the available credit used toward a buydown, other closing costs, or a different negotiated offer. Make sure the full payment fits your life without relying on a future refinance.
Educational estimates only. Not a loan offer, preapproval, commitment to lend, or guarantee of program availability. Loan approval depends on credit, income, property, and lender requirements. Payments are rounded to cents; lender figures may differ. Financed upfront mortgage insurance and funding fees are not included. Your actual note obligation remains in place even if subsidy funds are unavailable.
Prepared by Kadyn Nannini, Phoenix Lending Group · NMLS #1998133. Updated November 5, 2026. Program reference: Fannie Mae temporary interest rate buydown guidance.
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