Temporary Mortgage Buydown Calculator
See how 2-1, 3-2-1, 1-1, or 1-0 temporary rate buydowns reduce your initial monthly mortgage payments and calculate the upfront seller concession needed.
Buydown Analysis
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How Temporary Interest Rate Buydowns Work
A **temporary interest rate buydown** reduces a homebuyer’s effective mortgage interest rate during the initial 1 to 3 years of homeownership. Unlike permanent rate discount points (which permanently lower the rate over 30 years), temporary buydowns provide immediate, front-loaded payment relief during the transition period into a new property.
The monthly payment reduction is funded through an upfront cash deposit placed into a dedicated escrow account at closing. This cost is typically covered as a **seller concession**, **builder credit**, or **lender incentive**. Each month during the buydown period, funds are automatically transferred from the buydown escrow account to the lender to supplement the buyer's reduced payment.
Frequently Asked Questions About Rate Buydowns
What is the difference between a 2-1 and 3-2-1 buydown?
A **2-1 buydown** lowers your rate by 2.0% in Year 1 and 1.0% in Year 2 before reverting to the permanent note rate in Year 3. A **3-2-1 buydown** reduces your rate by 3.0% in Year 1, 2.0% in Year 2, and 1.0% in Year 3 before returning to the final note rate in Year 4.
Do I have to qualify for the loan at the temporary lower rate or full note rate?
Under standard Fannie Mae, Freddie Mac, FHA, and VA underwriting guidelines, borrowers must qualify based on the **full note rate** (or standard qualifying rate guidelines) to ensure long-term payment stability when the temporary buydown period ends.
What happens to remaining buydown funds if I refinance or sell early?
If you refinance or sell the home before the buydown period expires, any unspent funds remaining in the buydown escrow account are generally credited back to reduce your remaining principal mortgage balance at payoff.
