A 2-1 buydown lowers your rate by 2 points the first year and 1 point the second, then returns to the note rate. See each payment and the upfront cost.
How this is calculated Embed on your siteUpdated October 2026
A 2-1 buydown lowers your mortgage rate by 2 percentage points in the first year and 1 point in the second, then the loan settles at its full note rate for the rest of the term. Someone pays upfront to cover the difference, usually the seller or a builder trying to close a sale. This calculator shows the payment in each phase and what the buydown costs. With the defaults, a $400,000 loan at 6.5% costs $2,026.74 a month in year one, $2,271.16 in year two and $2,528.27 from year three on. Funding that costs $9,104.
The buydown cost is simply the payment savings added up: twelve months of the year-one discount plus twelve months of the year-two discount. That money goes into an escrow account at closing and is used to top up your lower payments so the lender still receives the full note-rate payment.
| Loan at 6.5% | Year 1 payment | Year 3+ payment | Buydown cost |
|---|---|---|---|
| $300,000 | $1,520 | $1,896 | $6,828 |
| $400,000 | $2,027 | $2,528 | $9,104 |
| $500,000 | $2,533 | $3,160 | $11,380 |
The cost is roughly 2.3% of the loan amount at these rates.
If a seller offers about $9,000, compare three uses of it. A 2-1 buydown saves $9,104 over two years. The same money as discount points might lower the rate by roughly a half point for the whole loan; check the trade-off with the mortgage points calculator. A $9,000 price cut lowers the loan, the payment and the property tax a little for as long as you own the home. If you expect to stay put and keep the loan, permanent savings usually beat temporary ones. If you expect rates to fall and plan to refinance, the buydown's front-loaded savings can make more sense.
See the full payment with taxes and insurance in the mortgage calculator.
A temporary rate reduction: 2 points below the note rate in year one, 1 point below in year two, then the full rate for the rest of the loan. It is paid for upfront, often by the seller or builder.
The total of the first two years' payment savings. On a $400,000 loan at 6.5%, that is about $9,104, or roughly 2.3% of the loan.
It helps if your income will rise or you need cash early, and especially if the seller pays. If you plan to keep the loan for many years, a permanent rate reduction or a lower price is often worth more.
Generally no. Lenders typically qualify you at the full note rate, so you need to afford the year-three payment.
Any unused buydown funds are usually applied to your loan balance, but how it's handled depends on your lender and loan program.
Payments use the standard amortization formula at the reduced rates for years one and two and the note rate after. Not lending advice; confirm terms with your lender.