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Temporary Buydown Calculator
See how a 3-2-1, 2-1, or 1-0 temporary buydown reshapes the first few years of a mortgage. Compare the reduced payments against the permanent note payment and calculate the upfront subsidy a seller, builder, or buyer would need to fund.
Permanent payment
$2,918.69
Year 3 through payoff at the note rate
Year 1 payment
$2,347.41
At 4.750%
Year 1 savings
$6,855.34
Total subsidy cost
$10,366.70
Year-by-year payment path (2-1 buydown (2 years))
The buydown rate is temporary. The payment steps up each year until it reaches the note payment.
| Year | Rate | Monthly payment | Monthly savings vs. note | Annual subsidy |
|---|---|---|---|---|
| 1 | 4.750% | $2,347.41 | $571.28 | $6,855.34 |
| 2 | 5.750% | $2,626.08 | $292.61 | $3,511.36 |
| 3+ | 6.750% | $2,918.69 | — | — |
Budget check
Underwriting usually qualifies you at the full note rate even when a seller or builder is funding the buydown. Make sure the permanent payment is affordable before using the subsidized year-one payment for budgeting.
How to Use
- Enter the loan amount, the permanent note rate, and the loan term being offered.
- Pick the buydown structure — 3-2-1, 2-1, or 1-0 — based on what your lender or builder is quoting.
- Review the first-year payment, each subsequent step-up, and the permanent note payment that starts after the buydown ends.
- Check the total subsidy cost so you know how much the seller, builder, or buyer would need to escrow at closing to fund the reduced payments.
Frequently Asked Questions
What is a temporary mortgage buydown?
A temporary buydown lowers the borrower's effective interest rate for the first one to three years of the mortgage. Funds escrowed at closing cover the payment difference so the borrower pays a lower amount early in the loan.
How does a 3-2-1 buydown differ from a 2-1 buydown?
A 3-2-1 cuts the rate by 3% in year one, 2% in year two, and 1% in year three before reverting to the note rate. A 2-1 is a shorter two-year version. Both settle at the permanent note rate once the subsidy runs out.
Who pays for the subsidy?
The subsidy is usually funded by the seller, builder, or lender credit at closing, though a buyer can pay for it. The calculator totals the cost so you can negotiate who funds the escrow.
Will the borrower qualify at the lower payment?
Usually no. Most lenders qualify the borrower at the full note rate because the buydown is temporary. Plan your budget around the permanent payment before leaning on the reduced year-one payment.
Is this the same as discount points?
No. Discount points permanently lower the interest rate for the life of the loan. A temporary buydown only reduces the payment during the buydown period and then reverts to the note rate.
Related Calculators
Mortgage Points Calculator
Compare a permanent discount-point buydown against a temporary buydown structure.
Mortgage Calculator
Confirm the permanent note payment and plan for the full-rate payment that starts after the buydown.
Closing Cost Calculator
Understand how seller credits are typically allocated between buydown funds, closing costs, and rate buydowns.
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