2-1 Buydown (2% Year 1, 1% Year 2)
1-0 Buydown (1% Year 1)
1-1 Buydown (1% Year 1, 1% Year 2)
3-2-1 Buydown (3% Y1, 2% Y2, 1% Y3)
Total Cost of Buydown
$0.00
(Total Subsidy Required in Escrow)
Base Monthly Payment (Principal & Interest):$0.00
Year
Rate
Payment
Monthly Savings
Annual Savings
How Much Is a Rate Buydown?
In the current real estate market, calculating "how much is a rate buydown" is essential for both buyers looking for lower payments and sellers looking to incentivize a purchase. A rate buydown is not a standard loan calculation; it is a calculation of a subsidy cost.
This calculator determines the total upfront cash required (usually paid by the seller or builder) to temporarily lower the interest rate on a mortgage for the first 1 to 3 years.
Understanding the Costs
The cost of a temporary buydown is mathematically equivalent to the total interest saved by the buyer during the buydown period. This money is deposited into an escrow account at closing and is used to supplement the buyer's monthly payments.
For example, in a 2-1 Buydown:
Year 1: The rate is 2% lower than the note rate. The cost for this year is the difference between the full payment and the reduced payment, multiplied by 12.
Year 2: The rate is 1% lower than the note rate. The cost is the payment difference multiplied by 12.
Year 3+: The rate returns to the full note rate. No subsidy is required.
Why Use This Calculator?
Unlike a standard mortgage calculator which shows you what you pay, this tool solves for the concession amount. If a seller offers you $10,000 in concessions, you can use this tool to see if a 2-1 buydown fits within that budget, or if you should opt for a 1-0 buydown instead.
Common Buydown Structures
2-1 Buydown: Most popular. Significant savings in year 1, moderate savings in year 2.
1-0 Buydown: A smaller upfront cost for the seller, offering 1% lower rate for just the first year.
3-2-1 Buydown: Expensive upfront cost, but offers drastic payment relief for three years (3% off, then 2%, then 1%).
function calculateBuydown() {
// 1. Get Inputs
var loanAmount = parseFloat(document.getElementById('bdLoanAmount').value);
var noteRate = parseFloat(document.getElementById('bdNoteRate').value);
var termYears = parseFloat(document.getElementById('bdTerm').value);
var buydownType = document.getElementById('bdType').value;
// Validation
if (isNaN(loanAmount) || isNaN(noteRate) || isNaN(termYears) || loanAmount <= 0 || termYears <= 0) {
alert("Please enter valid positive numbers for Loan Amount, Rate, and Term.");
return;
}
// Helper: Calculate PI Payment
// P = L[c(1 + c)^n]/[(1 + c)^n – 1]
function getMonthlyPayment(p, ratePercent, years) {
if (ratePercent === 0) return p / (years * 12);
var monthlyRate = ratePercent / 100 / 12;
var numPayments = years * 12;
return (p * monthlyRate) / (1 – Math.pow(1 + monthlyRate, -numPayments));
}
// Calculate Base (Note) Payment
var basePayment = getMonthlyPayment(loanAmount, noteRate, termYears);
// Define Logic based on Type
// Format: Array of objects { year: 1, rateReduction: 2 }
var plan = [];
if (buydownType === '2-1') {
plan = [
{ year: 1, reduction: 2 },
{ year: 2, reduction: 1 }
];
} else if (buydownType === '1-0') {
plan = [
{ year: 1, reduction: 1 }
];
} else if (buydownType === '1-1') {
plan = [
{ year: 1, reduction: 1 },
{ year: 2, reduction: 1 }
];
} else if (buydownType === '3-2-1') {
plan = [
{ year: 1, reduction: 3 },
{ year: 2, reduction: 2 },
{ year: 3, reduction: 1 }
];
}
var totalSubsidyCost = 0;
var htmlRows = '';
// Loop through plan to calculate savings per year
for (var i = 0; i < plan.length; i++) {
var yearNum = plan[i].year;
var reduction = plan[i].reduction;
var reducedRate = noteRate – reduction;
// Payment is calculated based on the FULL term, just with the lower rate
var reducedPayment = getMonthlyPayment(loanAmount, reducedRate, termYears);
var monthlySavings = basePayment – reducedPayment;
var annualSavings = monthlySavings * 12;
totalSubsidyCost += annualSavings;
htmlRows += '
';
htmlRows += '
Year ' + yearNum + '
';
htmlRows += '
' + reducedRate.toFixed(3) + '%
';
htmlRows += '
$' + reducedPayment.toFixed(2) + '
';
htmlRows += '
$' + monthlySavings.toFixed(2) + '
';
htmlRows += '
$' + annualSavings.toFixed(2) + '
';
htmlRows += '
';
}
// Add final "Remainder of Term" row
var remainingStartYear = plan.length + 1;
htmlRows += '
';
htmlRows += '
Years ' + remainingStartYear + '-' + termYears + '