Buy Down Calculator

There is more than one way to get a lower interest rate. One option that some borrowers use is getting a temporary buydown from the seller. A temporary buydown allows a seller to put up-front funds into an escrow account to reduce the interest rate for one, two, or three years at the start of the mortgage. In turn, this could reduce the borrower’s monthly mortgage payment temporarily. A temporary buydown calculator, like the one below, can help borrowers understand how a buydown might work for their situation.

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.

Choose the length of the loan term you plan to use. Standard loan terms are 15 or 30 years.

You can enter a dollar amount or percentage. Some programs allow down payments as low as 3%. Just remember, the more you put down, the less your payment will be.


Your actual interest rate will be determined by your credit score, loan type and other factors.

Year Rate Payment Monthly Savings** Annual Savings
Buydown Total Cost:

This is the total estimated cost of the temporary buydown. This can only be paid for by either the seller or builder. It cannot be paid for by the borrower.

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.

*A temporary buydown reduces the initial 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 Conventional 30 year fixed rate loan with a purchase price of $225,000, down payment of 20%, and an annual percentage rate of 6.673% with $3,320.80 in APR fees would result in an interest rate of 3.5% (monthly payment of $808.28) for the first year, 4.5% (monthly payment of $912.03) for the second year, 5.5% (monthly payment of $1,022.02) for the third year, and 6.5% at cost of .107 points ($192.60) paid at closing (monthly payment of $1,137.72) for the fourth year which will continue for the life of the loan thereafter. Rate pulled 1/30/23, rates change daily. Scenario used a 760 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. Certain loan programs do not allow buydowns, additional restrictions apply. Contact your PrimeLending loan officer for more details.

**Monthly savings based on initial period payments (based on buydown type) compared to payments after rate returns to its regular rate before the buydown.


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 buy down period.

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.

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.

There is also a 1-1 temporary buydown which will reduce the buyer’s interest rate by 1% for the first two years of their mortgage.

Finally, the 1-0 temporary buydown which allows the borrower to reduce their interest rate by 1% for the first year of their loan.

Using the buydown calculator can help you discover what you might be able to save on your own mortgage.

How do you calculate a mortgage buydown?

Trying to do the math yourself to calculate a mortgage buydown can feel unnecessarily challenging. Using PrimeLending’s free mortgage calculator can make it easy because our calculator will do the math for you. Here’s how to calculate a mortgage buydown using the mortgage buydown calculator:

Select your buydown type from the dropdown menu (3-2-1, 2-1, 1-1, or 1-0)

Enter the number of years of your loan term, the total loan amount, and the interest rate percentage into the remaining calculator fields and click Calculate.

The difference between the payment amount of the original mortgage and the total annual savings of the buydown program selected equals the total cost of the buydown.

How does a buydown work on a mortgage?

A temporary mortgage buydown is a lump sum that will need to be paid for by the builder or seller to temporarily reduce the interest rate of the mortgage for a specified time frame. Since the buydown lowers your interest rate, it will effectively reduce your overall monthly mortgage payment for the first few years of your mortgage.

Is a buydown a good idea?

A temporary mortgage buydown can benefit both buyers and sellers. For buyers, an interest rate buydown reduces the interest rate for the first few years of the mortgage which also reduces the monthly payment for the term of the buydown. Sellers like the buydown option because it enables them to offer a tangible financial benefit to the buyer without reducing the asking price of the home. The buydown also makes the home more affordable for the first few years. They key to using a buydown option is making sure the buydown is discussed during the offer and negotiation process of the home purchase, so buyers and sellers are on the same page.