2-1 buydown calculator
Enter the loan amount and note rate, choose a temporary buydown structure, and compare its cost with the year-by-year payment change.
Calculator results are estimates for education, not a quote, prequalification, or approval. Verify every figure with your loan officer before making decisions.
In short
Key takeaways
- The buydown cost equals the sum of the payment shortfalls, dollar for dollar. There is no discount baked into it.
- Sellers and builders fund most buydowns as a concession. Fannie Mae caps those credits at 3, 6, or 9 percent of the price depending on your down payment (guideline B3-4.1-02).
- You qualify at the full note rate on agency loans, not the year-one rate (guideline B2-1.4-04, as of its August 2024 update).
- Refinance or sell early and the unused escrow is credited against your payoff. The money is not lost.
Written and reviewed by the Intel Loans, Inc. lending team · NMLS #2858705Updated July 2026
At the negotiating table
The buydown is a seller credit, so it is negotiable.
A 2-1 buydown lowers the payment for the first two years, and the credit above is what has to be funded to cover it. Ask the seller to pay it. The number here is the figure to put in the offer, and the payment you will actually make in years one and two.
See if a buydown fits your offerThe mechanics
How the escrow actually works
A temporary buydown never changes your loan. The note rate, the term, and the amortization schedule stay exactly as written. What changes is who covers the payment for the first year or two.
Agency rules also cap how deep the structure can go: under Fannie Mae guideline B2-1.4-04, the rate reduction cannot exceed 3 percentage points below the note rate and can step up by no more than 1 point per year. That is why 3-2-1 is the deepest version you will see offered.
The escrow gets funded at closing
The buydown cost, computed exactly like this calculator computes it, is deposited into a custodial account with your loan servicer. It shows up as a line on your closing disclosure.
You pay the reduced amount
Your monthly bill during the buydown period is the payment figured at the reduced rate. On a 2-1, that means 2 points off the note rate for months 1 through 12, then 1 point off for months 13 through 24.
The servicer draws the difference
Every month, the servicer pulls the shortfall from the escrow so the investor who owns your loan receives the full note-rate payment. Your actual loan terms never changed; the account is bridging the gap.
Pay off early, get the remainder
Sell or refinance before the escrow is spent and the standard buydown agreement credits the unused balance against your loan payoff. The money is not forfeited.
Worked example
The default scenario, in dollars
A hypothetical example matching the calculator's starting inputs: a $400,000 loan on a 30-year term at the calculator's preloaded example note rate, the kind of file we see on Orlando and Tampa new construction where the builder is offering a credit.
| Period | Payment figured at | Monthly P&I | Monthly savings | Subsidy for the year |
|---|---|---|---|---|
| Year 1 | 2 points below the note rate | $2,147 | $514 | $6,167 |
| Year 2 | 1 point below the note rate | $2,398 | $263 | $3,156 |
| Years 3 to 30 | The full note rate | $2,661 | None | None |
| Total buydown cost | $9,323 |
| Structure | Rate relief | Escrow cost on this example |
|---|---|---|
| 1-0 | 1 point off for year one | $3,156 |
| 2-1 | 2 points off year one, 1 point year two | $9,323 |
| 3-2-1 | 3, 2, then 1 point off across three years | $18,342 |
Who pays
The concession has a ceiling, and the buydown counts against it.
A seller-funded or builder-funded buydown is an interested-party contribution, and Fannie Mae guideline B3-4.1-02 caps those by your down payment. Every dollar of buydown escrow competes with closing-cost help under the same ceiling.
| Down payment | Max seller/builder credit | Room on a $500,000 purchase |
|---|---|---|
| Less than 10% | 3% of the price | $15,000 |
| 10% to 25% | 6% of the price | $30,000 |
| More than 25% | 9% of the price | $45,000 |
| Investment property | 2% of the price | Agency loans do not allow temporary buydowns on investors anyway |
One honest note on paying for it yourself: a borrower-funded temporary buydown is just prepaying your own payments a year in advance, dollar for dollar, with zero discount. If it is your money, permanent discount points or a harder price negotiation almost always deserve a look first. The structure earns its keep when someone else's money funds the escrow.
The decision
Buydown, price cut, or permanent points?
The same $9,323 credit can be spent three ways. Using the example loan above, here is what each buys.
| Option | What it does | The math on this example | Best when |
|---|---|---|---|
| 2-1 buydown | Cuts the payment for two years, then full freight | Saves $514/mo year one and $263/mo year two, then $0 | You expect to refinance or your income is climbing |
| Price cut | Shrinks the loan and every payment for 30 years | Loan drops about $7,458 at 80% LTV; payment falls roughly $50/mo, forever, plus slightly lower doc stamps and title | You plan to hold the loan well past year two |
| Permanent points | Buys the note rate down for the whole term | One point costs 1% of the loan; what it buys changes with daily pricing, so we quote it live | You want lasting relief and will not refinance soon |
A plain if/then: choose the buydown when someone else funds it and you have a believable reason the payment gets easier, a refinance, a raise, a lease ending. Choose the price cut when you are settling in for the long haul. Choose points when you want the relief permanent and priced into the note. If your fallback plan is refinancing, sanity-check it with the refinance break-even calculator, and remember that concession dollars also have to cover Florida closing costs; the Florida closing cost calculator itemizes doc stamps and title the way your county charges them.
The trade-offs, stated plainly
Year three arrives on schedule. You qualified at the full note rate, so the payment should be survivable on paper, but a budget built around the year-one number is a common regret. Do not bank on rates falling before the subsidy runs out; nobody is promised a refinance window. And every concession dollar routed into the escrow is a dollar that could have cut the price or covered closing costs, so negotiate the total credit first and choose how to spend it second. One more path worth checking on resales: if the seller carries an older low-rate loan, an assumption can beat any buydown, and we wrote honestly about when in the assumable mortgage guide.
Questions we actually get
Who typically pays for a 2-1 buydown?
The seller or the builder, as a negotiated concession. Builders lean on buydowns hard because a payment incentive moves inventory without cutting the recorded sale price of the community. Lender-funded versions exist too, but that money is not free; it is built into the note rate you are offered.
Do I qualify at the lower year-one rate?
No. On conforming loans, Fannie Mae guideline B2-1.4-04 requires the lender to qualify you at the full note rate, ignoring the buydown. The structure helps your early cash flow, not your approval.
Can I use a 2-1 buydown on an investment property?
Not on an agency loan. Fannie Mae limits temporary buydowns to principal residences and second homes, on purchases and limited cash-out refinances. A few non-QM programs will structure one on an investor loan; ask us and we will check the current shelf.
Is a buydown better than permanent discount points?
Different tools. A buydown is temporary relief funded dollar for dollar; points buy a lower rate for the whole term. If someone else is paying and you expect to refinance within a few years, the buydown usually wins. If you are keeping the loan a long time, run the same credit as points or a price cut before deciding. The table on this page walks through all three.
What happens to the escrow if I sell in year one?
The unused funds are applied against your loan payoff under the standard buydown agreement. You do not lose the remaining subsidy; it shows up as a smaller balance due at closing.
Do FHA and VA loans allow temporary buydowns?
Yes, both allow them, each with its own qualifying rules and paperwork. The escrow mechanics work the same way. Tell us which program you are in and we will confirm how the buydown is treated before you sign anything.
Writing an offer with a buydown in it?
Send us the deal. We price the escrow, check the concession caps against your down payment, and put the year-by-year payments in writing before you sign.
This is not a commitment to lend or an offer of credit. All loan approvals are subject to credit review, underwriting, and property evaluation. Programs, terms, and conditions are subject to change without notice.
Intel Loans, Inc., NMLS #2858705. Licensed in Florida. Verify our licensing at nmlsconsumeraccess.org. Equal Housing Opportunity.
Calculator results are estimates for education, not a quote, prequalification, or approval. Verify every figure with your loan officer before making decisions.
Any rates shown are hypothetical examples you enter for estimation, not offers. Actual rates and terms depend on your application and may change or be unavailable at commitment or closing.