2-1 buydown calculator.

How the buydown math works

A temporary buydown lowers the rate for the first one to three years and the borrower's payment steps up until it reaches the note rate. Each year's payment is a standard amortized payment on the same loan balance and term at the reduced rate. The cost is the sum, over the buydown months, of the note-rate payment minus the reduced payment. That money is deposited up front and released to the lender each month, so the lender still receives the full note payment.

Worked example

$400,000, 30-year loan, 6.5% note rate. The note payment is $2,528.27 a month.

• 2-1: year 1 at 4.5% is $2,026.74 (saves $501.53 a month, $6,018.37 for the year); year 2 at 5.5% is $2,271.16 (saves $257.12 a month, $3,085.39). Cost: $9,103.76.
• 3-2-1: years 1 to 3 at 3.5%, 4.5% and 5.5%. Cost: $17,888.88.
• 1-0: year 1 at 5.5%. Cost: $3,085.39.

Compared with permanent points: if the same $9,103.76 bought a 0.25-point rate cut (an example figure, not a quote), the payment would fall about $65.40 a month for the life of the loan and pay back after 140 months, so it wins only if you keep the loan longer than that. The buydown instead gives a bigger payment cut early. A seller credit of the same $9,103.76 is the same dollars, spent your way.

Rules and sources

Fannie Mae's Selling Guide allows a temporary buydown when the rate reduction does not exceed 3%, the rate increase does not exceed 1% per year, and the funds are deposited in a custodial account fully funded by the time the loan is submitted to Fannie Mae. When an interested party pays, Fannie Mae's interested-party contribution limits apply. The borrower qualifies at the note rate, not the bought-down rate.

Sources: Fannie Mae Selling Guide B2-1.4-04, Temporary Interest Rate Buydowns (page dated August 7, 2024) and B3-6-04, Qualifying Payment Requirements (checked September 30, 2026).

Frequently asked questions

How much does a 2-1 buydown cost?

The subsidy is the sum of the monthly payment differences over the buydown years. On a $400,000, 30-year loan at a 6.5% note rate, a 2-1 buydown costs about $9,104, or roughly 2.28% of the loan. The cost scales with the loan amount and the note rate.

Who pays for a buydown?

Anyone can fund it, commonly the builder or seller as a concession, sometimes the lender or the buyer. When an interested party such as a seller or builder pays, Fannie Mae's interested-party contribution limits apply. The funds must be deposited in a custodial account and be fully funded by the time the lender submits the loan to Fannie Mae.

Do I qualify at the lower buydown payment?

No. For Fannie Mae loans the borrower qualifies at the note rate without considering the bought-down rate, so a buydown does not raise how much you can borrow.

Is a 2-1 buydown worth it?

It lowers your payment for the first two years only, and you still owe the note-rate payment afterwards. It is worth most when someone else pays for it, when you expect income to rise, or when you plan to refinance or sell early. If you keep the loan long enough, the same money spent on permanent points saves more in total; the calculator shows the break-even.

What are the limits on a temporary buydown?

Under the Fannie Mae Selling Guide the rate reduction cannot exceed 3 percentage points and the rate cannot rise by more than 1 point per year. A 2-1, 3-2-1 and 1-0 all fit inside those limits. Other investors, FHA, VA and USDA have their own rules, so confirm with your lender.

Principal and interest only; taxes, insurance and mortgage insurance are not modelled. Rules for FHA, VA, USDA and other investors differ. This is an estimate, not a loan offer or financial advice; your Loan Estimate governs.