Buydown Calculator

There is more than one way to get a lower interest rate. One option that some borrowers use is getting a temporary buydown from the seller or builder. A temporary buydown allows a seller or builder to put funds into an escrow account to reduce the interest rate for one, two, or three years at the start of the mortgage. In turn, this could reduce the borrower’s monthly mortgage payment temporarily. A temporary buydown calculator, like the one below, can help borrowers understand how a buydown might work for their situation.

Choose the length of the loan term you plan to use. Standard loan terms are 15 or 30 years.

You can enter a dollar amount or percentage. Some programs allow down payments as low as 3%. Just remember, the more you put down, the less your payment will be.

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Your actual interest rate will be determined by your credit score, loan type and other factors.

Year Rate Payment Monthly Savings** Annual Savings
Buydown Total Cost:

This is the total estimated cost that can be paid for by the buyer, seller, lender or third party.

These calculations are tools for learning more about the mortgage process and are for educational/estimation purposes only. Payments shown are estimates and do not include amounts for taxes and insurance premiums (if applicable). The actual payment obligation will be greater. This does not constitute an offer or approval of credit. Contact a PrimeLending home loan officer for actual estimates.

*A temporary buydown reduces the initial rate by up to 3%. Adjusts 1% each year, returns to original fixed rate after buy down period. For example, a 3-2-1 buydown Conventional 30 year fixed rate loan with a purchase price of $572,000, down payment of 20%, and an annual percentage rate of 7.178% would result in an interest rate of 4.125% (monthly payment of $2,772.20) for the first year, 5.125% (monthly payment of $3,114.47) for the second year, 6.125% (monthly payment of $3,475.53) for the third year, and 7.125% at cost of .051 points ($291.72) paid at closing (monthly payment of $3,853.67) for the fourth year which will continue for the life of the loan thereafter. Rate pulled 12/5/24, rates subject to change. Scenario used a 740+ credit score. Loans are subject to borrower qualifications, including income, property evaluation, and final credit approval. Temporary buydowns must be paid for by seller or builder. Certain loan programs do not allow buydowns, additional restrictions apply. Payment shown is principal and interest and does not include amounts for taxes and insurance premiums (if applicable). The actual payment obligation will be greater. Contact your PrimeLending loan officer for more details.

**Monthly savings based on initial period payments (based on buydown type) compared to payments after rate returns to its regular rate before the buydown.