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3/2/1 Buydown Calculator

See exactly how a temporary rate buydown lowers your payment year by year, what it costs, and whether the seller contribution makes it worth it for your situation.

Break-even analysisSeller concession tool3/2/1, 2/1, and 1/0 optionsNo credit pull
What this calculator shows
Year by year paymentYes
Total buydown costYes
Seller vs your costYes
Break-even monthYes
Is it worth it verdictYes
Payment comparison chartYes
How this works: Enter your loan amount, rate, and buydown type. Add a seller concession percentage to see exactly how much the seller covers and what your out-of-pocket cost is. Drag the horizon slider to see if the buydown makes sense for how long you plan to stay.

What is a temporary rate buydown?

A temporary buydown is a financing arrangement where the interest rate on your mortgage is reduced for the first one to three years before settling at the permanent rate. The buydown is funded by paying a lump sum at closing, most commonly by the seller as a concession.

There are three common structures:

  • 3/2/1 Buydown: rate is 3% lower in year 1, 2% lower in year 2, 1% lower in year 3, then full rate from year 4 onward
  • 2/1 Buydown: rate is 2% lower in year 1, 1% lower in year 2, then full rate from year 3
  • 1/0 Buydown: rate is 1% lower in year 1 only, then full rate from year 2

When does a buydown make sense?

A buydown is most valuable when the seller covers all or most of the cost. In that case you get meaningful payment relief in the early years at little or no cost to you.

  • You are buying in a higher rate environment and want lower initial payments while you settle in
  • The seller has motivation to contribute concessions to close the deal
  • You expect your income to grow, making the higher payment in later years manageable
  • You plan to refinance before the buydown period ends if rates drop
  • A price reduction and a buydown are being compared and you want to see which gives more value

Common questions about buydowns

Is a buydown the same as a lower interest rate?
No. A buydown temporarily reduces your payment for the first one to three years, but your note rate stays the same. When the buydown period ends, your payment adjusts to reflect the full rate. A lower interest rate permanently reduces your payment for the life of the loan. Both strategies cost money upfront. The buydown is usually funded by the seller. A lower rate typically requires you to pay discount points.
Can a seller always contribute toward a buydown?
Seller contributions toward a buydown are allowed on most loan types, including conventional, FHA, and VA loans, but there are limits on how much a seller can contribute depending on the loan type and your down payment. On conventional loans, seller concessions are typically capped at 3% to 9% of the purchase price depending on down payment. Your loan officer can confirm the exact limits for your scenario before you negotiate.
What happens to the buydown funds if I sell or refinance early?
If you sell or refinance the home before the buydown period ends, the unused portion of the buydown funds is typically returned to you as a credit. This is one of the reasons a seller-funded buydown can be particularly attractive. The exact treatment depends on your loan agreement, so confirm with your lender.
Is a buydown better than asking for a price reduction?
It depends on how long you plan to stay and what matters more to you — a lower monthly payment now or a lower loan balance over time. A price reduction permanently reduces your loan balance and every payment for the life of the loan. A buydown gives you more cash flow in the early years, which can matter a lot when you are moving in and managing other costs. Use this calculator to compare both scenarios side by side.

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