Rate buydown calculator

What this compares

Four ways to pay the same loan. The baseline is the note, with no buydown. A temporary 2-1 and a temporary 1-0 keep that note and use a subsidy account to cover part of the payment. Discount points are different: the loan actually has the lower rate you type in, and it amortizes at that quoted rate.

Monthly payments use the standard fully amortizing formula, payment = loan × r ÷ (1 − (1 + r)⁻ⁿ), where r is the annual rate divided by 12 and n is the number of monthly payments. At a 0% rate the payment is the loan divided by the number of months. Each payment is rounded half-up to the cent, and a temporary subsidy is the difference of those rounded payments. On the guide’s example that cent-rounded convention is a 2-1 subsidy of $7,283.16 and a 1-0 subsidy of $2,468.40. Rounding the unrounded difference first is $7,282.92, and quantizing the exact unrounded total once is $7,283.01. The 1-0 is $2,468.40 here, versus $2,468.31 quantized once. This tool uses the cent-rounded monthly convention only. A real buydown agreement can still differ by a few cents. If you hold the loan for the whole term, the comparison still counts a full rounded payment every month, including the last one. That is not the adjusted final payment a servicer uses to make the balance zero, and it is not an exact payoff.

Temporary plans do not change the loan

On a 2-1, the year-1 payment is calculated as if the rate were 2 percentage points lower, and year 2 as if it were 1 point lower. On a 1-0, only the first 12 payments use a rate 1 point lower. That calculation rate is not the note rate. The note rate, the monthly amount you owe on the note, and the way the balance pays down all stay on the original note. If a calculation rate would be negative, that plan is marked unavailable. The calculator does not quietly use 0% instead.

If you fund the subsidy yourself, you are moving your own cash from closing into those earlier payments. Over the buydown, the lower payments add up to the deposit. That is not a reduction in interest. If the holding period ends before the subsidy is used up, the remainder is unapplied. This page does not call that remainder a loss, and it does not call it a refund. The buydown agreement decides what happens at payoff.

If you mark the subsidy as paid by a seller, builder, or lender, the buyer’s upfront cash for that subsidy is $0 in the comparison. That is only the arithmetic. It does not mean anyone has offered to pay it. Seller credits are often built into the price. The cash-to-close guide is the separate question of what you bring to closing.

Points need a quoted rate

One discount point costs 1% of the loan amount. How much rate that point buys is not fixed. The CFPB’s own example uses a $400,000 loan and a 0.25% reduction, then says another lender might give more or less for the same point. The 6.25% default is that same kind of labeled assumption on the guide’s $320,000 example. Change it to the rate on your Loan Estimate. The rate buydown guide walks through the example this tool starts with. The rate drop vs. price cut calculator answers a different question and does not model buydown funding.

What this tool can’t tell you

• Your lender’s actual rate, points price, or whether you qualify. Temporary buydowns in the Fannie Mae rules, and fixed-rate loans on Freddie Mac’s product page, are qualified at the full note rate.
• Whether a temporary buydown is allowed. Fannie Mae’s rules do not allow them on investment property. Freddie Mac’s product page also lists investment-property mortgages as ineligible and says it is not a substitute for the Seller/Servicer Guide. This tool does not restate Freddie’s numeric limits.
• Loans on buildings with 5 or more units. The comparison is 1–4 unit residential payment math.
• FHA, VA, and USDA rules. They differ. Ask the lender which program this loan is.
• Taxes, insurance, mortgage insurance, HOA dues, a future refinance, or the equity you would have at payoff.

FAQ

Sources

The rules behind the labels are the same ones cited on the rate buydown guide, accessed Nov. 9, 2026. The main ones:

• CFPB, lender credits and discount points (last reviewed Oct. 19, 2023). One point is 1% of the loan. The rate reduction depends on the lender, the loan, and the market.
• CFPB, trends in discount points (Apr. 5, 2024; page last modified Aug. 22, 2024). There is no fixed points-to-rate value.
• CFPB, principal and interest versus the total monthly payment (last reviewed Aug. 28, 2023).
• Fannie Mae Selling Guide B2-1.4-04, Temporary Interest Rate Buydowns (08/07/2024).
• Fannie Mae Selling Guide B3-4.1-02, Interested Party Contributions (05/07/2025).
• Freddie Mac, mortgages with temporary subsidy buydown plans. That page says it is not a substitute for the Seller/Servicer Guide. Guide sections 4204.3 and 5501.6 were not used as numeric limits here.

Caza is not affiliated with or endorsed by the CFPB, Fannie Mae, or Freddie Mac. This is general information, not financial, legal, tax, or lending advice.