Rate buydown calculator
Enter the loan, note rate, term and buydown schedule to see each temporary rate, the monthly payment in that year, the note payment after the buydown, and the total subsidy, for your review of the loan file.
Runs in your browser. What you type isn't sent or stored.
Calculate a rate buydown
Loan
The note rate after the buydown ends. There is no default.
Buydown schedule
2-1: note − 2% in year 1, note − 1% in year 2. 1-0: note − 1% in year 1. 3-2-1: note − 3%, then − 2%, then − 1%. After that, the note rate.
How a temporary rate buydown works
A temporary buydown lowers the rate the borrower pays for the first one to three years. After that, the payment is the note-rate payment for the remaining term.
This calculator prices 2-1, 1-0 and 3-2-1 schedules: each year's rate is the note rate minus 2 then 1; minus 1; or minus 3 then 2 then 1.
Worked example
- $400,000 at a 6.5% note rate over 30 years: $2,528.27 note payment.
- 2-1 buydown: year 1 at 4.5% → $2,026.74; year 2 at 5.5% → $2,271.16.
- Year 1 subsidy: ($2,528.27 − $2,026.74) × 12 = $6,018.36.
- Year 2 subsidy: ($2,528.27 − $2,271.16) × 12 = $3,085.32.
- Total buydown cost: $9,103.68.
Round numbers for illustration only; the rate, term and schedule are inputs, not defaults.
What this calculator doesn't do
- It prices temporary rate reductions only. It doesn't model permanent discount points, ARM resets or lender credits outside the schedule you pick.
- It holds the loan balance at the original amount for each year's payment (standard temporary-buydown payment formula). It doesn't track a declining balance year to year.
- It doesn't make a lending decision.
Questions
What is a 2-1 buydown?
Year 1 is the note rate minus 2 percentage points; year 2 is the note rate minus 1; after that the note rate. The calculator shows each year's payment and the subsidy versus the note payment.
How is the buydown cost calculated?
For each buydown year, (note payment − that year's payment) × 12. The total is the sum across the buydown years. Payments are standard amortization of the loan at that year's rate over the full term.
What happens after the buydown ends?
The payment becomes the note-rate payment for the remaining term. The calculator shows that payment next to the buydown years.
Does it handle permanent discount points?
No. It prices temporary rate reductions only. Permanent points that change the note rate itself are outside this tool.
Can the temporary rate go below zero?
If the note rate minus the year's reduction would be below zero, the calculator uses 0% for that year.
Is anything I type saved?
No. The figures stay in your browser for this page view. Nothing is stored or sent.
Not legal or tax advice.
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