2-1 Buydown Mortgage 2027 Calculator
A 2-1 buydown lowers your mortgage interest rate by 2% in year 1, 1% in year 2, returning to the note rate from year 3 onward. Seller pays the cost upfront into escrow. Calculate monthly payment savings and total buydown cost. Source: CFPB consumer guidance.
How a 2-1 Buydown Works
In a 2-1 buydown, the seller (or builder) deposits funds into an escrow account at closing. That escrow subsidizes 2% of the interest rate in year 1 and 1% in year 2. From year 3 onward, you pay the full note rate. The escrow runs dry exactly after 24 months. Most common in slow housing markets where sellers offer concessions to attract buyers. Source: CFPB Buydown Disclosure rules.
Cost of a 2-1 Buydown — Who Pays?
On a $400,000 loan at 6.75% note rate vs 4.75% effective year 1: monthly P&I drops from $2,595 to $2,087 — savings $508/month × 12 = $6,096 year 1. Year 2 savings about $3,200. Total cost to seller: ~$9,300 escrowed at closing. Buyer benefits: lower year-1-2 payment, time to grow income or refinance. Seller benefits: avoids price reduction, faster sale.
Refinance Considerations Before Year 3
If rates fall and you refinance before year 3, the remaining escrow balance typically goes back to the lender or buyer per the buydown agreement — check fine print. Refinancing locks in lower rate permanently but lose the 2-1 escrow subsidy. Best strategy: hold 2-1 buydown if rates stay flat; refinance if rates drop 100+ bps.
2-1 vs 3-2-1 vs 1-0 Buydowns
Variations: 3-2-1 buydown reduces rate by 3%/2%/1% in years 1-3 (costs more upfront, more time to recover). 1-0 reduces by 1% year 1 only (cheapest option). All buydowns are temporary — note rate is what governs after the buydown period. Source: CFPB Mortgage Acts and Practices Rule.