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2-1 Buydown Calculator for Loan Officers

Free temporary buydown calculator for mortgage professionals. Calculate monthly payments, total buydown costs, and borrower savings for 2-1 temporary buydowns. Instant results, no signup required.

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How Does a 2-1 Buydown Work?

A 2-1 temporary buydown reduces the borrower's interest rate by 2% in year 1 and 1% in year 2, then returns to the original note rate for the remaining loan term. Not sure how to explain buydowns to clients? Read our complete guide to explaining buydowns with proven scripts.

Year 1

Rate Reduced by 2%

If the note rate is 7%, the borrower pays only 5% during the first 12 months. This creates significant monthly payment savings when buyers need it most.

Year 2

Rate Reduced by 1%

In year 2, the rate increases to 6% (1% below the note rate). The borrower still benefits from reduced payments while adjusting their budget.

Year 3+

Full Note Rate

Starting year 3, the rate returns to the original 7% for the remaining 28 years. Many borrowers refinance before this point if rates drop.

2-1 Buydown Real-World Examples

Example 1

Loan Amount:$400,000
Note Rate:7%
Year 1 (5%):$2,147/mo
Year 2 (6%):$2,398/mo
Year 3+ (7%):$2,661/mo
Total Buydown Cost:$17,280

Example 2

Loan Amount:$300,000
Note Rate:6.5%
Year 1 (4.5%):$1,520/mo
Year 2 (5.5%):$1,703/mo
Year 3+ (6.5%):$1,896/mo
Total Buydown Cost:$12,528

Why Loan Officers Recommend 2-1 Buydowns

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Helps Buyers Qualify

Lower Year 1 payments reduce DTI ratios, helping borderline buyers qualify for homes they otherwise couldn't afford at full market rates.

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Seller/Builder Paid

In most cases, sellers or builders pay the buydown cost as a concession. The buyer gets lower payments without spending their own cash.

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Easier to Explain

2-1 buydowns are simpler than discount points or ARMs. Clients understand "your payment is lower for 2 years" better than complex rate structures.

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Refinance Flexibility

Buyers can refinance anytime during the buydown period with no penalty. Many plan to refi within 1-2 years if rates drop.

2-1 Buydown vs Other Rate Reduction Options

Feature2-1 BuydownDiscount PointsARM Loan
Duration2 years tempPermanentVaries (3-10 yrs)
Who PaysUsually sellerBorrower upfrontNo cost
Qualifying RateLower Year 1 rateReduced perm rateInitial low rate
Refinance ImpactNo penaltyLose upfront costNo penalty
Best ForNew buyers, short-termLong-term holdsRate shoppers

2-1 Buydown Calculator FAQ

A 2-1 buydown is a temporary mortgage rate reduction where the interest rate is 2% lower in year 1, 1% lower in year 2, then returns to the original note rate for years 3-30. For example, if the note rate is 7%, the borrower pays 5% in year 1, 6% in year 2, and 7% for the remaining 28 years.
The cost of a 2-1 buydown equals the total interest savings the borrower receives in years 1 and 2. On a $400,000 loan at 7%, the buydown typically costs $15,000-$20,000. This cost is usually paid by the seller, builder, or lender as a concession, not by the borrower.
In most cases, the seller or builder pays for the 2-1 buydown as a sales incentive. The buydown cost can be covered by seller concessions (up to 3-9% of the purchase price depending on loan type). Lenders may also offer buydowns using lender credits in some cases.
Yes, a 2-1 buydown can be excellent for first-time buyers because it lowers monthly payments during the first two years when budgets are often tightest. The reduced payments in years 1-2 make homeownership more affordable initially, and many buyers plan to refinance before year 3 when rates drop.
Absolutely. Borrowers can refinance at any time during the buydown period. Many buyers use a 2-1 buydown to qualify for a home at today's higher rates, then refinance to a lower rate within the first 1-2 years if market rates drop.
A 2-1 buydown is temporary (2 years), while buying discount points permanently lowers your rate for the entire loan term. Buydowns are typically seller-paid and don't require borrower cash. Points are paid upfront by the borrower and provide permanent savings.
Use our free 2-1 buydown calculator above to compare monthly payments with and without the buydown. If the seller is paying for it, a 2-1 buydown almost always makes sense. If paying yourself, compare the buydown cost to your monthly savings over 2 years plus your likelihood of refinancing.
Most conventional, FHA, and VA lenders allow 2-1 buydowns. However, each lender has specific guidelines about who can pay for the buydown and maximum contribution limits. Check with your loan officer to confirm buydown eligibility for your specific loan program.

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