See if a rate buydown could lower your monthly payment — and whether the savings are worth the cost.
Temporary Buy Down Calculator
See how a seller- or builder-paid temporary buydown can lower your monthly payment in the early years of your loan — and exactly what it costs.
Loan Details
Effective rates update as you change the note rate above.
Your Buydown Breakdown
Monthly P&I By Year
Year-by-Year Detail
| Period | Effective Rate | Monthly P&I | Monthly Savings |
|---|---|---|---|
| Enter your loan details and click Calculate. | |||
What This Costs
This is the amount that needs to be deposited into the buydown escrow account at closing. It’s typically paid by the seller, builder, or lender — not the borrower.
Calculator estimates are for educational purposes only and do not constitute a loan offer or commitment to lend. Actual rates, payments, and buydown costs may vary based on loan program, credit profile, and investor guidelines. Borrowers must qualify based on the full note rate, not the temporary buydown rate. Temporary buydowns are typically available on owner-occupied and second homes; investment properties are not eligible. Contact Dustin Schaff (NMLS #222644) at The Schaff Group for personalized guidance.
What Is a Mortgage Buydown?
A mortgage buydown is a strategy where money is paid upfront to lower the borrower’s interest rate or monthly payment. In simple terms, a buydown trades upfront cost for lower payments.
This can be helpful when a buyer wants to reduce the monthly payment, use seller credits more strategically, or create more breathing room during the first few years of homeownership.
The key question is not just, “Can I lower the payment?” The better question is: “Does the cost of the buydown create enough savings to make the strategy worthwhile?”
There are two common types of buydowns:
- Temporary buydown: lowers the payment for a set period, such as the first 1, 2, or 3 years
- Permanent buydown: uses discount points to lower the interest rate for a longer period, often for the life of the loan
A buydown may be paid by the buyer, seller, builder, or another allowable party, depending on the loan program and underwriting guidelines. The best strategy depends on the cost, monthly savings, seller credit available, expected time in the home, and whether a future refinance may make more sense.
What This Calculator Helps You Decide
A buydown is not just about lowering the payment. It is about choosing the best use of money. This calculator can help buyers and Realtors compare whether it may be better to use available funds for:
- A temporary rate buydown
- A permanent rate buydown using discount points
- Closing costs
- A lower purchase price
- Preserving cash after closing
Temporary Buydown vs. Permanent Buydown
Temporary Buydown
A temporary buydown lowers the monthly payment for a set period of time. The payment is reduced during the early years of the loan and later returns to the full note rate payment.
Common structures include the 1-0, 2-1, and 3-2-1 buydown. These are often discussed when a seller or builder is offering credits to help make the monthly payment more affordable at the beginning of the loan.
Permanent Buydown
A permanent buydown usually means paying discount points to lower the interest rate. Instead of reducing the payment only for the first few years, a permanent buydown may lower the interest rate as long as the borrower keeps that mortgage.
A permanent buydown may make sense when the borrower expects to keep the loan long enough for the monthly savings to outweigh the upfront cost.
Common Temporary Buydown Options
Lowers the payment for the first year of the mortgage. May be useful when the available credit is not large enough to fund a longer temporary buydown, but the buyer still wants short-term payment relief.
- Year 1: Rate 1% below note rate
- Year 2+: Full note rate
Lowers the payment for the first two years of the mortgage. Provides immediate payment relief, but the buyer still needs to understand the full payment once the temporary buydown period ends.
- Year 1: Rate 2% below note rate
- Year 2: Rate 1% below note rate
- Year 3+: Full note rate
Lowers the payment for the first three years. Provides more upfront payment relief, but usually requires a larger buydown cost and may not be available for every loan program or lender.
- Year 1: Rate 3% below note rate
- Year 2: Rate 2% below note rate
- Year 3: Rate 1% below note rate
- Year 4+: Full note rate
When a Buydown May — or May Not — Make Sense
May Make Sense When…
- The seller or builder is offering credits
- The buyer wants to lower the monthly payment
- The buyer expects income to increase in the future
- The buyer wants to preserve cash after closing
- The buyer plans to keep the loan long enough to benefit
- The buydown creates a better outcome than a price reduction
May Not Make Sense When…
- The buyer expects to sell the home soon
- The buyer expects to refinance quickly
- The seller credit could be used better elsewhere
- The cost of discount points takes too long to break even
- The buyer is focused more on reducing cash to close
- The buyer is not comfortable with the payment after the buydown ends
Who Should Use This Calculator
For Homebuyers
Before choosing a mortgage buydown, review the full monthly payment before and after, the payment once a temporary buydown ends, the total cost, the monthly savings, the break-even point, and how long you expect to keep the home and loan.
A lower payment can be helpful, but the strategy should fit the bigger financial picture.
For Realtors
Instead of only negotiating a lower purchase price, you may be able to structure the offer with a seller credit that helps reduce the buyer’s payment through a temporary or permanent buydown — especially useful when the seller is open to concessions.
Before writing the offer, confirm the seller credit is allowed, useful, and within loan program limits.
Seller Credits & Buydown vs. Price Reduction
In many situations, seller credits may be used to help pay for a mortgage buydown, as long as the credit is allowed by the buyer’s loan program and does not exceed seller concession limits.
Before writing a contract with seller credits, buyers and Realtors should confirm the buyer’s loan type, property type, occupancy type, down payment percentage, maximum seller contribution allowed, estimated closing costs, and whether the buydown structure is allowed.
Buydown vs. Price Reduction
A seller-paid buydown and a purchase price reduction can both be valuable, but they solve different problems. A buydown may create more monthly payment relief. A price reduction lowers the purchase price and loan amount. In some cases, a seller credit used for a buydown may create more payment relief than a small price reduction. The math should be reviewed before the offer is written.
Ask Dustin to Review Your Buydown Strategy
A mortgage buydown can look attractive on paper, but the right answer depends on the cost, monthly savings, seller credit, expected time in the home, and whether a refinance may make more sense later. If you are buying a home, reviewing a seller credit, or helping a buyer write an offer, Dustin can help you compare the numbers before the contract is finalized.
Ask Dustin a Buydown Question