Mortgage Buydown Calculator

Rate buydowns reduce payments early-years but cost upfront — useful in seller-paid concession scenarios.

Loan amount

Note rate %

Year 1 reduction %

Year 2 reduction %

Buydown cost % of loan

Term years

Total 2-year savings

$9,323

Buydown cost

$10,000

Year 1 payment

$2,147

How the math works

Year 1 = full rate − Y1 reduction. Year 2 = full rate − Y2 reduction. Savings = (full − reduced) × 12.

$400k 7%/2-1: Y1 5% = $2,147 vs $2,661, Y2 6% = $2,398. Savings $6,168 + $3,156 = $9,324.

How to Use

Enter loan amount.
Enter note rate %.
Enter year 1 reduction %.
Enter year 2 reduction %.
Enter buydown cost % of loan.
Enter term years.
Read total 2-year savings.

Frequently Asked Questions

Buydown types?

2-1 buydown: rate drops 2% year 1, 1% year 2, full rate year 3+. 3-2-1: 3% / 2% / 1% / full. 1-0: 1% year 1, full year 2+. Typical cost: 2-1 buydown ~2.5% of loan amount, often paid by seller/builder concession in soft market. Reduced first-year payment averages 18–28% lower. Borrower must qualify at note rate (full rate), not buydown rate. Best fit: borrowers expecting income growth or planning refi as rates drop.

How does this debt analysis fit a workout strategy?

Workout, default, and recapitalization decisions depend on the gap between in-place debt and current asset value. Lenders evaluate cure cost, foreclosure timeline + cost, broker price opinion (BPO), and borrower equity. Borrowers evaluate equity in the property, refinance feasibility, and forbearance economics. This calculator provides one input to that multi-factor decision.

Discounted payoff (DPO) vs forbearance vs deed in lieu?

DPO: lender accepts less than full balance to avoid foreclosure cost, common with non-recourse and underwater assets. Forbearance: payment deferral 6–18 months, balance accrues, useful when value will recover. Deed in lieu: borrower transfers title to lender, faster than foreclosure but lender takes full risk. DPO often best when borrower has new capital + lender wants quick exit.

Special servicing dynamics?

CMBS loans transfer to special servicer at default or maturity default. Special servicer compensation aligns with workout, but timeline is 6–24 months and fees stack ($25–250k+ in costs). Whole-loan and balance-sheet lenders move faster but with less flexibility. Bridge and debt fund lenders most flexible. Time-to-resolution and total friction cost should be weighted in any borrower scenario.