Temporary Mortgage
Buydown Calculator
See how a temporary rate buydown could lower your principal and interest payment during
your first years at home. Compare four options and estimate the funds required.
What could your payments look like?
Your home. Your numbers.
Your note rate stays the same. Buydown funds cover part of the payment during the temporary period.
Complete your scenario
Check your inputs to see the payment estimate.
Your 2-1 buydown estimate
Principal and interest only
Estimated buydown funds
$11,062.92 1.81% of your home price| Period | Rate* | Monthly P&I | Monthly reduction | Annual subsidy |
|---|
Your payment step-up, at a glance
Plan for the regular payment: $3,051.47 /month P&I after your buydown ends.
Estimates exclude property taxes, homeowners insurance, mortgage insurance, HOA dues and other charges. Availability and funding limits depend on the loan program and lender. This is not a rate quote, loan approval or commitment to lend.
Monthly P&I is rounded to cents before calculating each subsidy. Final lender figures may vary slightly.
What Is a Temporary Mortgage Buydown?
A temporary mortgage buydown uses funds set aside at closing to pay part of your principal and interest payment during the first one, two or three years of your loan.
You pay a reduced amount during that period. The subsidy covers the difference between your payment and the regular payment. Your mortgage’s note rate and scheduled loan terms remain unchanged.
For Fannie Mae loans, you must qualify using the full note rate. A temporary buydown does not increase the amount you qualify to borrow.
How Does a 2-1 Buydown Work?
Year 1
P&I is calculated at a rate 2 percentage points below
your note rate
−2%
Year 2
P&I is calculated at a rate 1 percentage point below your
note rate.
−1%
Year 3 onward
You make the regular principal and interest
payment at your note rate.
Full rate
What Is a Temporary Mortgage Buydown?
A temporary mortgage buydown uses funds set aside at closing to pay part of your principal and interest payment during the first one, two or three years of your loan.
You pay a reduced amount during that period. The subsidy covers the difference between your payment and the regular payment. Your mortgage’s note rate and scheduled loan terms remain unchanged.
For Fannie Mae loans, you must qualify using the full note rate. A temporary buydown does not increase the amount you qualify to borrow.
How Does a 2-1 Buydown Work?
Year 1
P&I is calculated at a rate 2
percentage points below your note rate
−2%
Year 2
P&I is calculated at a rate 1
percentage point below your note rate.
−1%
Year 3 onward
You make the regular principal
and interest payment at your note rate.
Full rate
Temporary Buydown Options
Each number represents the percentage-point reduction used to calculate that year’s payment.
1-0
A lower payment for your first year.
Year 1: Note rate −1 point
Year 2+: Full note rate
1-1
The same reduced payment for two years.
Year 1: Note rate −1 point
Year 2: Note rate −1 point
Year 3+: Full note rate
2-1
A gradual step-up over your first two years.
YYear 1: Note rate −2 points
Year 2: Note rate −1 point
Year 3+: Full note rate
3-2-1
A longer transition to your regular payment.
Year 1: Note rate −3 points
Year 2: Note rate −2 points
Year 3: Note rate −1 point
Year 4+: Full note rate
Who Can Pay for a Temporary Buydown?
An eligible seller, builder, lender or another permitted party may provide the funds, depending on the loan program and transaction.
The funds cover the difference between your reduced payment and the regular payment. Seller and builder contributions may count toward applicable concession limits.
A seller negotiating an offer
A buydown can be one way to use a seller credit to support the buyer’s early payments.
A builder offering an incentive
Some new-construction incentives may be applied to an eligible temporary buydown.
A lender or other permitted source
Your loan officer can confirm funding sources and restrictions for your program.
Temporary vs. Permanent Rate Buydown
Both can reduce payments. The timing, structure and upfront cost differ.
| What to compare | Temporary buydown | Permanent rate buydown |
|---|---|---|
| How it works | Funds subsidize part of your early payments. | Discount points purchase a lower note rate. |
| How long it lasts | Usually one to three years. | For the remaining life of that loan. |
| After the initial period | Your payment rises to the regular P&I amount. | The lower note rate continues. |
| What to consider | Early cash flow and the future full payment. | Upfront cost and the time to break even. |
Compare seller credits, a price reduction and discount points with your loan officer. A future refinance or lower market rate is never guaranteed.
Why Buyers Consider Temporary Buydowns
A little flexibility when you’re settling in, provided the full regular payment fits your budget.
Room for the move
Lower early P&I can leave more room in your monthly budget for moving, furnishing and settling into your home.
A planned payment step-up
See the increases in advance and assess how they fit your income, savings and financial plans.
A clearer negotiation
Use an estimated buydown cost to discuss seller credits and compare your financing options.
Frequently Asked Question
What is a 2-1 mortgage buydown?
A 2-1 buydown reduces the borrower’s P&I payment for two years. Year one uses a payment-equivalent rate 2 percentage points below the note rate; year two uses 1 point below. In year three, the borrower begins making the regular P&I payment. The note rate does not change.
How much does a temporary buydown cost?
The estimated cost is the sum of the monthly payment subsidies. For a 2-1 buydown, multiply the year-one monthly reduction by 12, then add 12 times the year-two monthly reduction. This calculator rounds monthly payments to cents before calculating the differences.
Can a seller pay for my buydown?
Seller funding may be allowed, subject to your loan program’s rules and contribution limits. Your loan officer should review the total seller credit, other closing costs and lender requirements before you negotiate the amount.
Do I qualify at the lower payment?
For Fannie Mae loans, qualification is based on the note rate without the temporary reduction. Your lender will confirm the qualifying payment for your program.
Does this estimate include taxes and insurance?
No. It shows principal and interest only. Property taxes, homeowners insurance, mortgage insurance, HOA dues and other charges are additional. A temporary buydown does not reduce those expenses.
What happens when the buydown ends?
You make the regular monthly P&I payment at the note rate for the remaining loan term, unless you refinance or otherwise change the loan. Budget for that full payment from the start.
What if I refinance or sell before it ends?
Unused funds are handled according to your buydown agreement and loan requirements. They may be applied toward the payoff or handled as the agreement permits. Ask your loan officer or servicer to explain the written terms before closing.
Is a temporary buydown worth it?
Consider the upfront cost, funding source, early cash needs and your ability to afford the regular payment. Compare it with a closing-cost credit, a price reduction or permanent discount points. Do not rely on an unconfirmed income increase or future refinance.
Let’s Find Your Way Home.
Bring your numbers. We’ll help you understand your options.
MLO License Info: NMLS #1621958, NH Broker license #1621958MBRR, and MA Broker license #MB1621958, ME Broker License #1621958, FL Broker License #MBR4542, RI Broker License #20265029LB
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MLO License Info: NMLS #1621958, NH Broker license #1621958MBRR, and MA Broker license #MB1621958, ME Broker License #1621958, FL Broker License #MBR4542, RI Broker License #20265029LB
Company
Services
Contact
