2-1 Buydown Calculator
See your reduced payments for the first two years of a 2-1 buydown and what the buydown costs to fund.
By Onias Derilus, Mortgage Capital · NMLS# 1859012 · Last Updated: June 2026
The buydown cost is the total payment relief over the first two years. It is usually paid as a credit from the seller or builder at closing. Estimate only.
A 2-1 buydown drops your interest rate by 2 percent in the first year and 1 percent in the second year, then settles at the full note rate from year three on. It is a way to ease into the payment.
The relief is prepaid up front, usually by a seller or builder credit at closing, and held in an escrow account that covers the gap each month. It is not a permanent rate cut.
How to Use This Calculator
- 1
Enter your loan amount, note rate, and term.
- 2
Review the lower year 1 and year 2 payments.
- 3
Check the full payment that kicks in from year three.
- 4
Look at the total buydown cost to see what a seller credit would need to cover.
The Formula & Assumptions
Year 1 rate = note rate − 2%
Year 2 rate = note rate − 1%
Year 3+ = full note rate
Cost = (full − year 1) × 12
+ (full − year 2) × 12
Each yearly payment uses the standard amortized principal-and-interest formula at the reduced rate, while the loan balance still amortizes at the note rate.
The buydown cost is the sum of the monthly payment gaps across the first 24 months, which is what the escrow account must hold to subsidize your lower payments.
You still qualify at the full note rate, so the buydown lowers your payment, not your approval amount.
Frequently Asked Questions
Who pays for a 2-1 buydown?
Most often the seller or builder funds it as a closing credit, which makes it a popular concession in slower markets. A buyer or lender can also pay, but the appeal is usually that someone else covers the cost.
Do I qualify at the lower rate?
No. You still have to qualify at the full note rate. The buydown only reduces your actual payment in the first two years, so it lowers your cash outlay, not the income you need to be approved.
What happens to the buydown if I refinance early?
Any unused buydown funds in escrow are typically applied to your loan balance or returned per the lender agreement. If you refinance before the two years end, you do not lose the remaining subsidy.
Is a 2-1 buydown better than a permanent rate buydown?
It depends on how long you plan to keep the loan and the rate outlook. A 2-1 buydown helps most if you expect to refinance or your income to rise, while paying points for a permanent lower rate helps if you keep the loan long term.
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Rates are illustrative only. APR and payments vary by credit score, loan amount, and market conditions. Subject to credit approval. Not a commitment to lend. NMLS# 1859012. Equal Housing Lender.