Temporary vs Permanent Buydown Calculator
Compare a 2-1, 1-0 or 3-2-1 temporary buydown with a permanent rate buydown bought with the same dollars: payments by year and total cost over time.
Both options use the same dollars: the temporary buydown funds lower payments for a few years; the permanent one buys points.
| Year | No buydown | Temporary | Permanent |
|---|---|---|---|
| Year 1 | $2,661.21 | $2,147.29 | $2,506.56 |
| Year 2 | $2,661.21 | $2,398.20 | $2,506.56 |
| Year 3 | $2,661.21 | $2,661.21 | $2,506.56 |
| Year 4 | $2,661.21 | $2,661.21 | $2,506.56 |
| Year 5 | $2,661.21 | $2,661.21 | $2,506.56 |
| If you keep the loan | No buydown | Temporary | Permanent |
|---|---|---|---|
| 1 years | $427,871 | $421,704 | $425,537 |
| 2 years | $455,449 | $446,126 | $450,774 |
| 3 years | $482,711 | $473,388 | $475,691 |
| 5 years | $536,199 | $526,876 | $524,479 |
| 7 years | $588,131 | $578,808 | $571,715 |
| 10 years | $662,595 | $653,272 | $639,185 |
| 15 years | $775,093 | $765,770 | $740,431 |
With a temporary buydown you must still qualify, and be able to pay, at the full note rate. If the rate drops later you can usually refinance; a temporary buydown's subsidy is typically not refunded if you refinance or sell early (ask your lender). Estimates only.
How it works
The temporary buydown cost is the sum of the payment differences for the reduced years, an exact amount. The permanent option spends the same dollars on points and shows the rate they would buy at the reduction per point you enter. Both are compared as the total of payments plus the loan balance at each horizon, so a loan with lower payments is not mistaken for a cheaper one.
Learn the trade-offs in 2-1 buydown vs permanent buydown. If a seller is offering a credit instead, compare it in the seller credit vs price reduction calculator.
Sources and further reading
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Frequently asked questions
What is a 2-1 buydown?
A temporary buydown that lowers your rate by 2 percentage points in year one and 1 point in year two, then returns to the note rate. The payment difference is prepaid into an account at closing, usually by a seller or builder.
Is a temporary buydown better than a permanent one?
Neither is better in general. A temporary buydown gives the most relief up front; a permanent buydown lowers the payment for as long as you keep the loan. The calculator compares them using the same dollars.
Do I qualify at the lower payment?
Usually no. Lenders generally qualify you at the note rate, so you need income for the full payment.
What happens to the buydown money if I refinance or sell early?
It depends on the loan and lender, and unused funds are not always returned to you. Ask before you agree.
Who usually pays for a buydown?
Often the seller or a builder, as an incentive. A buyer can also pay for one. Choose who pays so the totals reflect your situation.
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