A 2-1 buydown calculator shows the lower payments you make in the first two years of a fixed-rate mortgage when someone pays to cut the rate by 2 points, then 1 point. Formula: Year 1 payment = PMT(note rate − 2%); year 2 = PMT(note rate − 1%); buydown cost = 12 × (note payment − year 1) + 12 × (note payment − year 2). On a $400,000, 30-year loan at 6.5%, year 1 is $2,026.74 a month, year 2 is $2,271.16 and year 3 onward is $2,528.27; the buydown fund needed is about $9,103.76.
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How to use the 2-1 buydown calculator
- Enter the loan amount, not the price of the home.
- Enter the note rate. That is the rate written on your promissory note, the one you pay from year 3 on.
- Enter the term in years, usually 30.
The 2-1 buydown calculator returns the year 1 payment at the note rate minus 2 points, the year 2 payment at minus 1 point, the full payment, and the total payment gap over the two years. That gap is roughly what has to sit in the buydown escrow account.
What formula does the 2-1 buydown calculator use?
Each payment is a standard amortizing principal-and-interest payment: P = L × r ÷ (1 − (1 + r)−n), where L is the loan, r is the monthly rate and n is the number of months. The tool runs it three times, at the note rate minus 2%, minus 1% and at the note rate. The buydown cost is 12 months of the year 1 gap plus 12 months of the year 2 gap.
The loan always amortizes at the note rate. The buydown does not change your balance; the escrow fund simply covers part of each payment for 24 months.
2-1 buydown calculator worked example
Results from the 2-1 buydown calculator on 30-year loans:
| Loan and note rate | Year 1 | Year 2 | Year 3 onward | Buydown cost |
|---|---|---|---|---|
| $300,000 at 7.0% | $1,610.46 | $1,798.65 | $1,995.91 | $6,992.38 |
| $400,000 at 6.5% | $2,026.74 | $2,271.16 | $2,528.27 | $9,103.76 |
| $500,000 at 6.0% | $2,387.08 | $2,684.11 | $2,997.75 | $11,091.85 |
For the $400,000 loan, the year 1 gap is $501.53 a month, or $6,018.36 for the year, and the year 2 gap is $257.11 a month, or $3,085.32. Together that is $9,103.68 before rounding; the tool shows $9,103.76 because it keeps every cent of each payment.
Who pays for a temporary buydown?
Sellers and home builders often fund a 2-1 buydown as a sales concession, and some lenders let buyers fund their own. The VA describes the money as set aside in an escrow account, with a portion applied each month to lower the payment. VA also says the payment increase should be capped at no more than 1% a year, which is exactly how a 2-1 structure steps up.
The CFPB notes that temporary buydowns usually last one to three years and that the payment rises each year until the buydown ends. If the seller is paying, compare the buydown with an equal price cut or a permanent rate reduction using the same dollars.
Will the lender qualify you at the lower payment?
Usually not. Many loan programs qualify you at the note rate, so you need to afford the year 3 payment from the start. Run the 2-1 buydown calculator with your note rate and look at the third payment; if that number strains your budget, the first two cheaper years do not solve the problem.
If you refinance or sell early, ask what happens to any unused buydown money. Treatment differs by lender and by program, so get the answer in writing.
2-1 buydown versus paying points
Points buy a lower rate for the life of the loan, while a temporary buydown only lowers two years of payments. If you plan to keep the loan for a long time, the same money spent on discount points can save more. Our mortgage points calculator shows the break-even month for that choice, and you can compare it with the 2-1 buydown calculator result side by side.
Estimates for education only, not tax, legal or financial advice. Check current rules with the tax authority or a qualified adviser.
Related converters and calculators
Related calculators:
- Mortgage calculator: monthly payment
- Refinance calculator: new rate savings
- House affordability calculator: budget check
Sources
CFPB: Why did my monthly mortgage payment go up or change?; VA Home Loans: Temporary buydowns; CFPB: How should I use lender credits and points?.
Questions about this calculator
What is a 2-1 buydown?
A temporary buydown where the effective rate is 2 points below the note rate in year 1 and 1 point below in year 2, then the full note rate from year 3.
How much does a 2-1 buydown cost?
About the sum of the payment savings for the two years. On a $400,000, 30-year loan at 6.5%, that is roughly $9,104.
Who usually pays for it?
Often the seller or builder as a concession, though some lenders allow the buyer to fund it.
Does a buydown change my loan balance?
No. The loan amortizes at the note rate; the buydown fund only covers part of the first 24 payments.
Is a 2-1 buydown better than points?
Points lower the rate for the whole loan. A buydown helps only in the first two years, so points can be better if you keep the loan long.
Check the assumptions and units before relying on a result. Financial, tax and health estimates do not replace advice for your individual circumstances.
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