About this Mortgage Buydown Calculator
A temporary buydown reduces the borrower payment for an initial period while the note rate remains the long-term loan rate. This calculator compares those reduced payments with the note-rate payment.
Who this calculator is for
- Investors comparing seller-credit structures.
- Buyers evaluating 3-2-1, 2-1, or custom temporary buydown scenarios.
- Agents and lenders explaining payment relief across early loan years.
When to use it
- Compare first-year and second-year payment savings.
- Estimate whether total payment savings exceeds the buydown cost.
- Model a custom three-year buydown instead of a fixed named program.
How to use this calculator
- Enter the loan amount, note rate, and loan term.
- Enter reduced buydown rates for years 1, 2, and 3.
- Enter the buydown cost or seller credit and compare it with total payment savings.
Key assumptions
- All rates, costs, and loan terms are entered by the user.
- Payments are estimated from the original loan amount and full amortization term for each rate scenario.
- Calculations run locally in your browser and are not stored by Calwarden.
Accuracy and testing
Review formula sources, default test cases, assumptions, unit handling, rounding rules, and changelog for this calculator.
How this calculator works
Inputs explained
Loan amount
Principal balance used for both the note-rate and buydown payment estimates.
Note rate
The long-term mortgage interest rate after the temporary buydown period ends.
Buydown rates
Reduced annual interest rates used for each early year of the temporary buydown.
Understanding your results
Example scenarios
2-1 style scenario
A $500,000 loan at a 7% note rate with first-year and second-year rates below the note rate can produce meaningful early monthly savings, but the value depends on the buydown cost.
Key Features
- Note-rate payment comparison
- Up to three buydown-rate years
- Savings versus buydown cost estimate
Things to Keep in Mind
This calculator simplifies temporary buydown mechanics and does not model lender-specific escrow accounts, qualification rules, APR disclosures, prepaid interest, taxes, insurance, or permanent discount points.
Tips & Best Practices
- Compare buydown cost with a permanent rate buydown quote if available.
- Check lender rules for seller credits, concessions, and temporary buydown eligibility.
- Make sure the borrower can afford the note-rate payment after the temporary period ends.
Glossary of Terms
- Note rate
- The contractual interest rate on the mortgage note.
- Temporary buydown
- A structure that lowers borrower payments for an initial period, usually funded by a seller, builder, lender, or borrower credit.
- Net savings
- Total temporary payment savings minus the upfront buydown cost entered by the user.