A temporary buydown lowers your monthly mortgage payment for the first few years of the loan. Someone, usually the seller or a builder, funds an account at closing, and with a 2-1 buydown, your payment is calculated as if your rate were 2% lower in year one and 1% lower in year two. Your actual rate never changes; the account is simply paying part of your bill, and when it runs out, you step up to the full payment.
That is the whole product. The interesting questions are what it does to your payment, what it takes to fund it, and whether that money could do more for you somewhere else. This page answers all three.
What Will A Temporary Buydown Save You?
Your payment savings each year and the true cost for popular buydown options
How Do You Use This Calculator?
Three inputs. Sale price is the contract price of the home. Down payment takes a percentage or a dollar amount, using the toggle inside the field. Note rate is the permanent rate you would lock, not the buydown rate.
Then pick a buydown. Each green card is one year of the buydown: the reduced rate, what you save per month, and what you actually pay instead of the full payment. The strip below the cards shows the year your payment returns to the full note rate, so the step-up is never a surprise.
The navy box is the number you negotiate with. The Buydown Escrow is the total cost someone must fund at closing, always equal to your total payment savings, and it is shown as a percentage of the sale price because that is how seller credits get negotiated.
Everything here is principal and interest only. For taxes, insurance, and your full monthly payment, run the closing cost and payment calculator.
What Is a Temporary Mortgage Buydown?
A temporary buydown lowers your effective interest rate for the first one to three years of your loan. Your payment during those years is calculated at a reduced rate, then steps up to your full note rate for the rest of the term.
Here is the part that surprises people. Your actual interest rate never changes. You lock a permanent note rate, you qualify at that full rate, and legally you owe the full payment from day one. The buydown works through an escrow account funded at closing. Each month you pay the reduced amount, the escrow account pays the difference, and your lender receives the full payment. When the account runs dry, you make the full payment yourself.
That structure means a buydown is not a cheaper loan. It is prepaid payment relief, and the money in that account is real money that came from somewhere. Keep that in mind as you read on.
How Does a 2-1 Buydown Work?
The 2-1 is the most common structure. Take a $600,000 purchase with 10% down, a $540,000 loan, and a 6.50% note rate. Here is the entire deal in one chart:
Notice the last row. $677 per month for the first year, plus $347 per month for the second year, adds up to $12,290, and that is exactly what the escrow account must hold. Total cost equals total savings, every time, on every structure. There is no financial engineering inside a temporary buydown, and once you see that clearly, every buydown decision gets easier.
What Do the Buydown Numbers Mean?
The numbers represent the first years of the loan, in order, and each one tells you how far below your note rate that year runs.
A 3-2-1 starts with a 3, meaning year one is 3% lower. The second number is the 2, so year two is 2% lower. The third year is the 1, meaning 1% lower. Then years four through thirty run at your full note rate.
A 2-1 is 2% lower in the first year and 1% lower in the second.
A 1-1 is 1% lower for each of the first two years.
A 1-0 is 1% lower for the first year only. The zero means year two is already back at your full rate.
The deeper the discount and the longer it runs, the more the buydown costs to fund. The calculator above prices all four on your numbers.
The Calculator Is One Piece of the Offer
What a buydown saves and what your offer should ask for are two different conversations. If you want to talk through your numbers, your seller credit, and whether a buydown or a closing cost credit fits you better, I am happy to walk through them with you. No credit pull required.
*No sales pressure, just the math.
Who Pays for a Temporary Buydown?
A seller or a lender funds the buydown.
Seller-funded is the classic version, and that includes builders. The buydown cost is written into the contract as a seller concession; the seller funds the escrow account at closing, and you get the reduced payments. This is similar to permanent rate buydowns, where you use the seller credit to pay for mortgage discount points.
Lender-funded buydowns exist too, most often as a 1-0 or 1-1. The lender covers the escrow account through the loan pricing, which is a longer conversation about how rates and credits work together. The short version: nothing from a lender is free, and you should always ask to see the same loan with the buydown money converted to a lender closing cost credit instead, so you can compare.
Scenario: The $11,000 Seller Credit
The Deal
$500k Condo
Closing Costs + Prepaids: $15,750
Total Cash Needed: $40,750
The Buydown Route
You still bring the full $40,750 to closing. The $11,000 goes into the lender's buydown escrow, and you get it back slowly, as a payment reduction spread over the next two years.
The Credit Route
The $11,000 pays your closing costs instead, so you bring just $29,750. Bank the difference and soften your monthly payment. Same buydown, except you control the account.
The Result
Both routes lower your payments by the same amount. Only one lets you stop, redirect, or invest the money when life changes. Money in your account is always worth more than the same money locked in someone else's escrow.
The bottom line: use every credit available to bring the least amount of cash to the table. Money in your account is always worth more than the same money locked in someone else's escrow.
One honest exception. If you do not trust yourself with $11,000 sitting in your bank account, the buydown works as a forced budget program. The money can only do one thing, and it does it automatically. I have had clients choose it for exactly that reason, and for them it was the right call.
Will a Buydown Fit Inside the Seller Credit Limits?
Before you negotiate a buydown into an offer, check whether it even fits, because loan programs cap what a seller can contribute:
Seller Concessions Cheat Sheet
| Loan Type | Property Type | Down Payment | Max Seller Contribution |
|---|---|---|---|
| Conventional | Primary & Secondary Home |
Less than 10% | 3% |
| 10% – 24.99% | 6% | ||
| 25% or more | 9% | ||
| Conventional | Investment** | 15% or more | 2% |
| FHA | Primary | 3.5% or more | 6% |
| USDA | Primary | 0% | 6% |
| VA | Primary | 0% | All Closing Costs |
| 4%* (Prepaids & Concessions) |
*Note: VA Seller Concessions includes prepaids, buyer debt payments (car loans, credit cards, student loans, etc) and other concessions. A seller-funded buydown counts against this 4% cap.
**Note: Temporary buydowns are limited to primary residences and second homes. Investment property purchases can use the seller credit, but not for a buydown.
Now stack that against what closing costs actually run here. In Washington, DC, and Maryland counties like Montgomery and Prince George's, closing costs with prepaids typically land around 3.25% of the price. In Northern Virginia, think Fairfax and Arlington, closer to 2.25%.
Take a buyer putting 5% down on a conventional loan in Maryland. The cap is 3% and closing costs run about 3.25%, so every seller dollar already has a job. Could the credit fund a buydown instead? Sure. But every dollar sent to the buydown is a dollar not covering your costs, and your cash to close rises to match. You would be funding your own buydown with extra cash at the table, the exact trade we just walked through above.
The 10% down buyer is in a different spot: a 6% cap leaves room to cover costs in full and fund a 2-1 with what is left over. Same buydown, very different deal. This is why the buydown conversation starts with the concession cap, not the payment chart.
What Happens to the Buydown Money If You Refinance Early?
With a seller-funded buydown, if you refinance or pay off the loan before the buydown ends, the remaining escrow funds are applied to your principal balance. You do not lose the money.
With a lender-funded buydown, the remaining funds typically go back to the lender. Refinance in month 8 of a one-year buydown, and the last four months of subsidy become lender profit. If you expect to refinance, that difference should factor into which buydown you accept.
When Does a Temporary Buydown Make Sense?
A buydown is money handed over at closing that gets handed back to you, a little each month, for the next year or two. So the only question that matters is whose money it is. The seller's? Great, take the deal. If it's yours? No thank you. Money that could sit in your bank account should never take the scenic route back to you.
The order of operations is simple, and it never changes.
Northern Virginia produces the cleanest fit I see: a 3% credit, about 2.25% in closing costs, and the leftover 0.75% is almost exactly the cost of a 1-0 buydown. A buydown also fits when a known expense is ending, a car payment, daycare, or an income step-up you can count on. The reduced payments bridge you to that date. Just be honest about whether the date is real.
Is Waiting for a Refinance a Plan?
No. What a buydown should never be is a bet that refinancing will bail you out before the payment steps up. Buyers who took buydowns in 2023 expecting a quick refinance are still waiting. If the full note-rate payment does not fit your budget, a buydown is hiding the problem, not solving it.
Why Is Everyone Talking About Buydowns Again?
Buydowns are a slow-market product first and a high-rate product second. When you get both at once, they are everywhere.
I know this cycle personally. I was hired in 2000 specifically to work with new home builders, and I worked with them right up until the financial crisis put most of them out of business. Toward the end of that run-up, you could feel it coming. Traffic slowed, rates were rising, and the mood shifted. My builders started paying all closing costs and funding two-year buydowns to keep homes moving.
The same thing has been happening in new construction since 2023, when rates nearly hit 8%. Builders can trade profit margin to move standing inventory. A regular homeowner selling their house usually does not have that luxury, which is why buydowns concentrate so heavily in new construction, and why a builder's "special financing" sign is really a market report.
None of this makes buydowns good or bad. It makes them a signal. When buydown offers are everywhere, the leverage belongs to buyers. Use it on the concession first. Decide on the buydown second.
Negotiate the Credit. Then Decide the Buydown.
You know how buydowns work now. The only question left is whether one belongs in your deal. Fifteen minutes and we will know.
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