What is a 2-1 Buydown?

A 2-1 buydown is a temporary mortgage financing arrangement that reduces your interest rate for the first two years of your loan. The rate is 2% lower in year one, 1% lower in year two, then returns to the full rate from year three onward.

How Does a 2-1 Buydown Work?

When you get a 2-1 buydown, the payment difference is funded upfront and placed in an escrow account. This money is used to subsidize your monthly payments during the buydown period.

Example: On a $400,000 loan at 7%:

• Year 1: Pay at 5% = $2,147/month (save ~$514/month)
• Year 2: Pay at 6% = $2,398/month (save ~$263/month)
• Year 3+: Pay at 7% = $2,661/month (full payment)

Who Pays for the Buydown?

The buydown cost is typically paid by:

• Sellers as a concession to attract buyers
• Builders to move new construction inventory
• Lenders as a promotional incentive

When Does a 2-1 Buydown Make Sense?

A 2-1 buydown is ideal when:

1. You expect to refinance within 2-3 years
2. You need lower initial payments to qualify
3. You anticipate income growth
4. Rates are expected to drop

Calculate Your 2-1 Buydown

Use our 2-1 Buydown Calculator to see exactly how much you can save and what the buydown will cost.