A 2-1 buydown lowers your rate by 2 points the first year and 1 point the second, then returns to the note rate. See each payment and the upfront cost.
A 2-1 buydown temporarily lowers your mortgage rate by two percentage points in the first year and one in the second, before returning to the note rate. This calculator shows each year's payment and the upfront cost that funds the lower payments.
The lender charges the full note rate, but a fund covers the gap so your payment is lower for the first two years. The cost equals the total payment savings across those years and is usually paid upfront, often by a seller or builder as an incentive. In year three the payment rises to the permanent note-rate amount.
A temporary buydown lowers the payment briefly and is best when a seller pays for it or you expect rising income. Paying discount points, by contrast, buys a permanently lower rate for the life of the loan. Because the buydown ends, qualify for and be ready to afford the full year-three payment before relying on the early savings.
Often the seller or builder as an incentive, though a buyer can pay it too. Either way it is funded upfront and equals the payment savings in the first two years.
The payment rises to the full note-rate amount for the rest of the loan, so make sure that final payment fits your budget.
They serve different goals. A buydown lowers payments temporarily; points lower the rate permanently. A buydown is most attractive when someone else funds it.
See the exact formula and a worked example on our methodology page.