Estimate your monthly payment, savings and buydown cost with a builder or seller paid 3-2-1, 2-1, 1-1 or 1-0 temporary mortgage buydown.
Wondering what a mortgage looks like broken down into monthly payments? Or how decreasing your down payment will impact what you pay over time? Use our calculators to run the numbers for yourself.
| Year | Rate | Payment | Monthly Savings1 | Annual Savings |
|---|
This is the total estimated cost that can be paid for by the buyer, seller, lender or third party.
Subject to investor guidelines.
These calculations are tools for learning more about the mortgage process and are for educational/estimation purposes only. Payments shown are estimates and do not include amounts for taxes and insurance premiums (if applicable). The actual payment obligation will be greater. This does not constitute an offer or approval of credit. Contact a PrimeLending home loan officer for actual estimates.
1Monthly savings based on initial period payments (based on buydown type) compared to payments after rate returns to its regular rate before the buydown.
A temporary buydown reduces the initial effective rate by up to 3%. Adjusts 1% each year, returns to original fixed rate after buy down period. For example, a 3-2-1 buydown FHA 30 year fixed rate loan with a purchase price of $419,900, down payment of 3.5%, and an annual percentage rate of 8.058% would result in an interest rate of 4.250% (monthly payment of $2,028.24) for the first year, 5.250% (monthly payment of $2,276.70) for the second year, 6.250% (monthly payment of $2,538.57) for the third year, and 7.250% (monthly payment of $2,812.57) for the fourth year which will continue for the life of the loan thereafter. Rate pulled 9/21/26, rates subject to change. Scenario used a 740+ credit score. Loans are subject to borrower qualifications, including income, property evaluation, and final credit approval. Temporary buydowns must be paid for by seller or builder. Additional restrictions may apply. Availability subject to investor guidelines. Payments shown are principal and interest and do not include amounts for taxes and insurance premiums (if applicable). The actual payment obligation will be greater. Contact your PrimeLending loan officer for more details.
What is a Buydown?
A mortgage temporary buydown reduces the effective interest rate used to calculate your payment during the first one to three years of a mortgage. After the buydown period ends, payments return to the full interest rate.
How Does a Buydown Work?
A temporary buydown lowers the payment calculation rate for a limited period. A seller or builder will put funds into an escrow account to cover the difference between the reduced payment and the payment based on the full rate.
How Much Does a Buydown Cost?
The total cost is based on the difference between payments calculated at the reduced rate and payments calculated at the full interest rate during the buydown period.
Who Can Fund a Buydown
A builder or seller can contribute funds towards a temporary buydown depending on the loan program and applicable guidelines. A Loan Expert can explain which options may be available for your mortgage.
What's the Difference?
Both temporary buydowns and discount points can help lower your mortgage costs, but they work in different ways. A temporary buydown reduces your interest rate for the first few years of the loan, while discount points provide a permanent interest rate reduction for the life of the mortgage.
| Comparison | Temporary Buydown | Discount Points |
|---|---|---|
| Duration of | Reduced payments for the first 1-3 years of the loan, depending on the buydown structure. | Reduced interest rate for the entire life of the loan. |
| Permanent Rate Reduction | No. The rate returns to the original note rate after the buydown period ends. | Yes. The lower rate remains in place for the life of the loan. |
| Cost Structure | Typically funded by the seller, builder, or another third party through an upfront contribution. | Purchased upfront by the borrower at closing. One discount point costs 1% of the loan amount. Each discount point may lower the interest rate as much as 0.25%, depending on product and loan characteristics. |
| Payment Impact | Creates larger monthly payment savings during the early years of the mortgage. | Provides smaller monthly savings, but for the entire loan term. |
| Best Use Case | Buyers who want lower initial payments, anticipate future income growth, or expect to refinance before the buydown period ends. | Buyers who plan to stay in the home long-term and want to maximize lifetime interest savings. |
Which Option Is Right for You?
A temporary buydown may be a smart choice if you're looking to ease into homeownership with lower initial monthly payments. Discount points may offer greater long-term value if you expect to keep the mortgage for many years and want a permanently lower interest rate. Not sure which strategy could save you more?
When Can a Temporary Buydown Make Sense?
A temporary buydown may make sense when lower payments during the first few years of homeownership are a priority and eligible funds are available to support the strategy.
Types of Temporary Buydowns
The type of temporary buydown you seek will depend on your individual needs. A borrower could reduce their rate for one year or up to three years if they so choose. The rate returns to the original fixed rate after the buydown period.
Frequently Asked Questions
How does a 2-1 buydown work?
The 2-1 temporary buydown reduces the borrower's interest rate for two years, reducing the rate by 2% the first year and 1% the second year.
How does a 3-2-1 buydown work?
A 3-2-1 temporary buydown can reduce a homebuyer's interest rate for three years and will lower the rate by 3% the first year, 2% the second year and 1% the third year. After the third year, the rate will remain the same for the loan term.
What happens when a buydown ends?
The type of temporary buydown you seek will depend on your individual needs. A borrower could reduce their rate for one year or up to three years if they so choose. The rate returns to the original fixed rate after the buydown period.
Does a buydown change my interest rate?
A temporary buydown does not permanently change the loan's note rate. Instead, it temporarily reduces the effective interest rate used to calculate monthly payments during the buydown period. Once the buydown ends, payments are based on the original note rate.
Can every mortgage use a buydown?
Not every mortgage is eligible for a temporary buydown. Consult your lender to determine if a buydown is available for your loan.
Is a temporary buydown better than discount points?
A temporary buydown lowers monthly payments for the first one to three years of the loan, while discount points reduce the interest rate for the entire loan term. The better option depends on the borrower's financial goals, available funds, and expected time in the home.
To get an idea of how mortgage points may work for you, try our free discount point calculator.
