Mortgage Buydown Calculator

🏠 What Is a Mortgage Buydown?

A mortgage buydown is a financing strategy that allows a borrower (or a third party like a seller or builder) to pay upfront fees (called “points”) to reduce the mortgage interest rate temporarily or permanently. The goal is to lower the borrower's monthly mortgage payments—especially during the early years of the loan.

🔑 Key Concepts

Buydown Points: Each point typically costs 1% of the loan amount and reduces the interest rate by around 0.25% (though this can vary).
Temporary Buydown: The interest rate is reduced for a set number of years (e.g., a 2-1 buydown lowers your rate by 2% in year 1 and 1% in year 2 before reverting to the full rate).
Permanent Buydown: You pay points to lower the interest rate for the life of the loan.

📉 Example: 2-1 Buydown

Let’s say you’re approved for a 30-year fixed loan at 6.5%:

YearInterest RateMonthly Payment on $300,000 Loan14.5%$1,52025.5%$1,7033–306.5%$1,896

This buydown lowers payments during the initial years, saving cash upfront.

🧠 Who Pays for a Buydown?

Buyer: To reduce payments and improve affordability
Seller: As a concession to help sell the home faster
Builder: As an incentive on new construction homes
Lender: Occasionally offered as part of promotional programs

✅ Why Use a Mortgage Buydown?

Lower Payments in Early Years
Ideal for buyers expecting income to rise or wanting to ease into payments.
Help Qualify for a Loan
Lower initial payments can help meet lender debt-to-income requirements.
Make the Home More Affordable
Particularly useful in a high interest rate environment.
Great for Sellers in a Buyer’s Market
Offering to cover a buydown can help sell the home without cutting the price.

⚠️ Considerations

You’ll pay more upfront in exchange for future savings.
It only makes financial sense if you plan to keep the home long enough to benefit from the lower interest rate.
Not all lenders allow buydowns—check with your mortgage provider.

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MORTGAGE BUYDOWN CALCULATOR