What does a buydown actually save?
Put in a price, a down payment, and a note rate. See a 1-0, 1-1, and 2-1 buydown and discount points side by side: what you'd pay each year, what the seller would need to credit, your cash to close, and the rate you'd still qualify at. No signup.
Taxes, closing costs, and points
less a month than the base loan. The seller's $29,991.00 credit pays for it, so it adds nothing to your cash to close. This estimate shows $343.01 less cash to close because it assumes prepaid interest at the lower year-one rate. If your lender charges prepaid interest at the note rate, cash to close matches the base loan.
You qualify at the full note rate. A temporary buydown lowers what you pay for a year or two, not what you qualify at.
Get Pre-Approved →Call Or Text UsEstimates for illustration, not a rate quote, a loan offer, or a pre-approval. The starting figures come from an example file, not today's pricing, and the rates shown are note rates, not APRs. A temporary buydown lowers your payment only for its first one or two years, and you qualify at the full note rate. Seller credits are capped by loan program, and not every program allows a buydown. Final terms subject to credit, property, and program approval.
All five options, side by side
Payments include $1,742.59 a month of taxes, insurance, and HOA. From year three on, every temporary buydown pays the base loan's payment.
| Figure | Base loan | 1-0 buydown | 1-1 buydown | 2-1 buydown | 1 discount point |
|---|---|---|---|---|---|
| Rate you pay, year one | 7.625% | 6.625% | 6.625% | 5.625% | 7.25% |
| Rate you pay, year two | 7.625% | 7.625% | 6.625% | 6.625% | 7.25% |
| Rate you pay, year three on | 7.625% | 7.625% | 7.625% | 7.625% | 7.25% |
| Principal and interest, year one | $8,861.58 | $8,016.69 | $8,016.69 | $7,207.22 | $8,540.85 |
| Total payment, year one | $10,604.17 | $9,759.28 | $9,759.28 | $8,949.81 | $10,283.44 |
| Monthly saving, year one | $0.00 | $844.89 | $844.89 | $1,654.36 | $320.73 |
| Monthly saving, year two | $0.00 | $0.00 | $844.89 | $844.89 | $320.73 |
| Qualifying rate | 7.625% | 7.625% | 7.625% | 7.625% | 7.25% |
| Qualifying payment | $10,604.17 | $10,604.17 | $10,604.17 | $10,604.17 | $10,283.44 |
| Cost of the buydown | $0.00 | $10,138.68 | $20,277.36 | $29,991.00 | $12,520.00 |
| Seller credit required | $0.00 | $10,138.68 | $20,277.36 | $29,991.00 | $0.00 |
| Cash to close | $326,161.74 | $325,990.23 | $325,990.23 | $325,818.73 | $338,617.42 |
| Months to earn back the points | n/a | n/a | n/a | n/a | 40 |
The qualifying rate is what the loan is underwritten at. For a temporary buydown it stays at the note rate. Discount points change the note rate itself, so the qualifying rate moves with them.
Want to know which buydown fits your deal?
Send us the numbers. We'll tell you which options your loan program allows, how much the seller can credit, and what today's pricing looks like.
Prefer to talk now? Call or text Chad: 858-353-8331.
About this calculator
Why is the qualifying rate different from the rate I pay?
Because a temporary buydown only changes the payment, not the loan. Your note rate stays the same, and the lender underwrites you at it, since that's the payment you'll make from year three on. On a DSCR loan the ratio is worked out the same way: at the full note rate, or at the interest-only payment on an interest-only loan. Discount points are the exception, because they lower the note rate itself.
Where does the seller credit figure come from?
It's the exact cost of the buydown: the difference between the full payment and the reduced payment, for every month the buydown lasts. That amount goes into a buydown account at closing, and each month the difference is drawn from it, so the lender still receives the full payment.
Why does a temporary buydown close for slightly less cash?
The seller's credit covers the buydown itself, so it adds nothing to what you bring to closing. The small saving on top comes from prepaid interest, the interest for the days between closing and your first payment period, which this example charges at the lower year-one rate. Some lenders charge it at the note rate instead, and then the cash to close is the same as the base loan.
How much does a discount point lower the rate?
It depends on the loan and the day's pricing, which is why it's an input. The starting value comes from the example file. Ask us for today's pricing on your loan and we'll put the real figure in.
Does a buydown help an investment property qualify?
A temporary buydown doesn't. The DSCR is calculated at the full note rate, so a deal that falls short still falls short. What it does do, on a rental that already qualifies, is put real money back in your pocket in years one and two, when a new rental is most exposed to vacancy and turnover costs.
New to buydowns?
Read how a seller-paid buydown works: where the seller's money goes, what happens if you refinance early, and when it beats a price cut.