Rate Buydown Calculator
Price a 2-1, a 1-0, or permanent points — payment relief, funding cost, and the break-even month that decides it.
Rate Buydown Calculator
Temporary buydowns (2-1, 1-0) are usually seller- or builder-funded escrows subsidizing early payments; permanent points are paid at closing to lower the rate for the life of the loan. Educational arithmetic only — not a quote or commitment to lend.
Temporary versus permanent buydowns
A temporary buydown (2-1 or 1-0) subsidizes your early payments from an escrow funded at closing — usually by a seller or builder as a negotiated concession. On a 2-1, year one bills as if your rate were two points lower and year two one point lower; your note rate never changes, and the escrow simply pays the difference. A permanent buydown is different money entirely: discount points paid at closing purchase a genuinely lower rate for the life of the loan. The temporary version is a cash-flow bridge; the permanent version is an investment with a break-even date — which is exactly what the calculator above computes.
When each one earns its cost
- 2-1 buydowns shine as seller/builder concessions: the same concession dollars often buy more early-payment relief as a buydown than as a price cut — and at jumbo scale the escrow figures are substantial negotiating currency.
- Permanent points make sense when the break-even beats your horizon: if you'll hold the loan well past the break-even month — and won't refinance before it — the points pay for themselves and then keep paying.
- Points are a bet against refinancing: buying the rate down and then refinancing two years later forfeits the unamortized benefit. Rate optimists should buy fewer points, not more.
- Who funds it matters: your own cash has alternative uses (reserves, investments); concession dollars from a seller have exactly one — spend those first.
At jumbo scale every one of these effects is amplified: a quarter-point on $1.5M is real money in both directions.
Negotiating buydowns in the current market
New-construction communities and slower resale segments are where buydown concessions live — builders in particular prefer funding a buydown over cutting list prices that reprice their whole community. The negotiating move is to ask for the concession as a dollar figure, then decide its best use with your lender: buydown escrow, permanent points, or closing costs, whichever your arithmetic favors. We run that three-way comparison on every offer involving concessions — it takes minutes and routinely finds thousands. Licensed broker, NMLS# 1967971.
Quick answers
Who funds the buydown escrow at closing?
Usually the seller or builder as a negotiated concession; lender-funded versions exist priced into the rate. Self-funding a temporary buydown rarely makes sense — permanent points serve that purpose better.
What happens to unused escrow if I refinance during the buydown?
The remaining escrow balance is typically credited against your payoff — you don't forfeit it. Confirm the treatment in the buydown agreement before closing.
Are points tax-deductible?
Purchase points are often deductible within IRS rules; refinance points generally amortize over the loan term. Your tax professional applies the specifics — worth asking before choosing points versus price reduction.
Can a buydown and points be combined on one loan?
Yes — a seller-funded 2-1 easing the early years can sit alongside buyer-paid points lowering the permanent rate. The calculator prices each piece separately; the combination is just both columns added together.
