Buydown Calculator: 2-1, Points or Price Cut

Enter the price, your down payment, the seller's credit and how long you expect to keep the loan. You get all three ways to spend the credit side by side: a price cut, points that lower your rate for good, and a 2-1 style temporary buydown, with what each saves a month and what each is actually worth by the time you sell or refinance.

Home price ($)

Down payment (%)

Rate with no buydown (%) (blank = the Freddie Mac average as of October 15, 2026: 7.40 for 30 years, 6.71 for 15)

Loan term

Seller's credit ($)

Years you expect to keep this loan (until you sell or refinance; home sellers had owned their homes a median of 11 years)

Rate your lender quotes if the credit buys points (%) (optional; blank = estimated at 0.25 off the rate per point)

2-1 buydown 3-2-1 buydown 1-0 buydown

Price cut: same cash down Price cut: same percent down

Was this calculator helpful?

Data reviewed: October 2026. Figures here come from published sources and change over time. How we verify

How the buydown calculator works

A seller who wants the sale to happen offers you money, say $10,000, and you get to decide what it does. It can come off the price. It can buy points that lower your rate for as long as you keep the loan. Or it can pay for a temporary buydown, a 2-1 being the common one, that cuts your payment hard for a year or two and then lets it rise. Same money, three very different shapes, and the monthly payment only tells you part of the story.

Enter the price, your down payment, the rate you would get with no deal, the size of the credit and how long you expect to keep the loan. The page prices all three side by side: what each saves a month, what each costs, and what each is actually worth by the time you sell or refinance. It also checks the credit against the limit on what a seller is allowed to contribute.

The formula

monthly payment = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
points = credit ÷ loan × 100
temporary buydown cost = Σ 12 × (full payment − bought-down payment), one term per year of the plan
worth after any month = monthly savings so far + (what you would owe with no deal − what you owe now)

P is the loan, r is the monthly rate (the yearly rate divided by 12, as a decimal), and n is the number of payments. The last line is the one that decides it. A smaller payment is only half of what a deal does: a price cut also leaves you owing less, and that lower balance is real money the day you sell or refinance. Counting both is the only fair way to put three different shapes of saving on the same scale.

Worked example

A $400,000 home with 20% down is a $320,000 loan. At 7.40% over 30 years that is $2,215.62 a month. The seller offers a $10,000 credit.

As a price cut, keeping the same $80,000 down, the loan drops to $310,000 and the payment to $2,146.38: $69.24 a month, for good.
As points, $10,000 is 3.125 points on a $320,000 loan. At the usual 0.25 per point that buys the rate down to about 6.62%, a payment of $2,047.67: $167.94 a month, for as long as you keep the loan.
As a 2-1 buydown, year one is figured at 5.40% and year two at 6.40%, saving $418.72 a month and then $214.00, before the payment settles at the full $2,215.62. The plan costs $7,592.56, which leaves $2,407.44 of the credit for closing costs.

By the monthly payment, the 2-1 wins easily, more than six times the price cut in year one. Now count what each is worth over an 11-year stay: the permanent buydown about $27,686, the price cut about $17,603, and the 2-1 exactly $10,000. The order has turned upside down.

Stay a shorter time and it moves again. The points are only worth the $10,000 the seller put in after 4 years, and they pass the price cut after 5 years and 7 months. Sell or refinance before that and the price cut was the better use of the same money. If your lender quotes 6.75% for the points rather than the rule of thumb, they save $140.10 a month and need 7 years and 3 months to pass the price cut.

Why a 2-1 buydown is worth exactly the credit, no more

This is the part that surprises people, because the 2-1's year-one number is the biggest on the page. A temporary buydown does not change your loan at all. Your note rate stays where it was. What the seller's money does is fill an account that tops up your payment for a year or two, so the plan costs precisely the payments it covers. You are being handed your own credit back in monthly installments.

That is genuinely useful for some buyers: a tight first year, a raise on the way, a second income starting soon. It is front-loaded cash, and front-loaded cash is worth having. It just cannot grow. Under Fannie Mae's rules, if the loan ends before the account is used up, what remains is credited toward the payoff or returned as the buydown agreement says, so the plan comes to the credit itself whenever you move. Read your agreement for which way yours goes.

One more thing the big number hides: a lender qualifies you at the full note rate on a temporary buydown, not the bought-down one. A 2-1 makes the first year cheaper, but it does not help you get approved. Points and a price cut both do.

When the points win, and when they do not

Points are the only choice that can end up worth more than the credit, because the lower rate keeps saving for as long as the loan lasts. But they start slowly. Each month you are collecting a modest saving, while the price cut has already done most of its work on the first day by shrinking what you owe. So the question that decides it is the one in the form: how long will you keep this particular loan?

Keep in mind that refinancing ends a loan just as surely as selling does. If rates fall and you refinance in three years, the points you bought leave with the old loan. The price cut's smaller balance comes with you into the new one. When rates are high, a refinance in the next few years is a real possibility, and that is a fair reason to put the stay a little shorter than you might guess.

The 0.25 per point the page uses when you leave the quote blank is a common rule of thumb, not a promise. The Consumer Financial Protection Bureau notes that points have no fixed value in terms of the rate, and lenders price them differently from day to day. Ask for a quote at the full credit amount, put it in the optional box, and the answer becomes yours rather than an estimate. Paying points yourself rather than spending a seller's credit? The mortgage points calculator compares up to three quotes and when each one pays for itself.

What a price cut does that a credit does not

It lowers what the appraisal has to support. A credit keeps the price high, and the home still has to appraise at that price.
It can lower your property tax in places that assess at the sale price, and it can lower private mortgage insurance if you are putting less than 20% down. Neither is counted above, so in those cases the price cut is worth a little more than the page shows.
It costs the seller slightly less. Commission and many transfer taxes are figured on the sale price, so a $10,000 cut at a 5% total commission costs the seller $9,500, while a $10,000 credit costs the full $10,000. For a seller the two are close, which is why many will happily do either. That leaves the choice where it belongs, with you.

How much a seller is allowed to give

Seller credits are capped, and the cap depends on your down payment. On a conventional loan, Fannie Mae's limits are figured on the lower of the price or the appraised value:

Down payment (home you will live in, or a second home)	Most a seller may contribute
Less than 10% (loan above 90% of the value)	3%
10% to just under 25%	6%
25% or more	9%
Investment property, any down payment	2%

Anything above the limit is treated as a cut to the price. A seller-paid buydown, temporary or permanent, counts toward the limit. FHA, VA and USDA loans have their own rules, so ask your lender which applies to yours. Temporary buydowns also have limits of their own: Fannie Mae allows a rate cut of no more than 3 points, rising no more than 1 point a year, which is why 3-2-1 is the largest common plan.

Sources

Where the numbers on this page come from. We go to the body that publishes the figure, not to another calculator. Figures on this page were checked against these sources in October 2026. See how we verify.

Primary Mortgage Market Survey, Freddie Mac. The 30-year fixed average of 7.40 percent and the 15-year average of 6.71 percent as of October 15, 2026, the defaults for a blank rate.
B2-1.4-04, Temporary Interest Rate Buydowns, Fannie Mae Selling Guide. A rate cut of no more than 3 percent, rising no more than 1 percent a year; the borrower is qualified at the note rate; unused funds are credited toward the payoff or returned as the buydown agreement specifies.
B3-4.1-02, Interested Party Contributions, Fannie Mae Selling Guide. Seller contribution limits of 3, 6 and 9 percent by loan-to-value for a principal residence or second home, 2 percent for an investment property; seller-funded buydowns count toward them.
Americans are paying upfront fees seeking to lower interest rates on mortgages, Consumer Financial Protection Bureau. One discount point is a fee of 1 percent of the loan amount, and points have no fixed value in terms of the change in rate.
Compliance Risks for Unearned Discount Points, Federal Reserve Bank of San Francisco, Consumer Compliance Outlook. Each point costs 1 percent of the loan and usually lowers the rate by 25 basis points: the rule of thumb used when the quote box is blank.
Top 10 takeaways from NAR's 2025 Profile of Home Buyers and Sellers, National Association of Realtors. Home sellers had owned their homes a median of 11 years before selling: the default stay.

Frequently asked questions

Is a buydown better than a price cut?

It depends on how long you keep the loan. On a $320,000 loan at 7.40%, a $10,000 credit saves $69.24 a month as a price cut and about $167.94 as points, but the points are only worth the $10,000 after 4 years and pass the price cut after about 5 and a half. Sell or refinance sooner and the price cut was the better choice.

What is a 2-1 buydown?

A temporary buydown where your payment is figured at 2 points below your rate in year one and 1 point below in year two, then returns to the full rate. The seller's money fills an account that covers the difference. Your actual loan rate never changes.

How much does a 2-1 buydown cost?

Exactly the payments it covers. On a $320,000 loan at 7.40%, year one saves $418.72 a month and year two $214.00, so the plan costs $7,592.56. That is also why a 2-1 can never be worth more than the credit that pays for it: it is the credit, paid back to you in installments.

How many points does a seller credit buy?

Divide the credit by the loan and multiply by 100, because one point is 1% of the loan. A $10,000 credit on a $320,000 loan is 3.125 points. A common rule of thumb is about 0.25 off the rate per point, but lenders price points differently, so ask for a written quote.

Do lenders qualify you at the bought-down rate?

Not on a temporary buydown. Fannie Mae requires the lender to qualify you at the full note rate, so a 2-1 lowers your first-year payment without helping you get approved. Points and a price cut both lower the payment you are qualified on.

How much can a seller contribute toward a buydown?

On a conventional loan for a home you will live in, Fannie Mae allows 3% of the price with less than 10% down, 6% with 10% to just under 25% down, and 9% with 25% or more. Investment properties are capped at 2%. A seller-paid buydown counts toward the limit, and FHA, VA and USDA loans have their own rules.

What happens to a 2-1 buydown if I refinance?

Under Fannie Mae's rules, money still in the buydown account when the loan is paid off is credited toward the payoff or returned as the buydown agreement specifies. Check your agreement. Permanent points, by contrast, simply end with the loan, which is why a likely refinance favors a price cut or a temporary buydown.

What is the difference between a 2-1 and a 3-2-1 buydown?

A 3-2-1 starts 3 points below your rate and steps up one point a year for three years, so it saves more and costs more. On a $320,000 loan at 7.40% it costs $14,950.72, more than a $10,000 credit can cover. Fannie Mae caps a temporary buydown at 3 points, which is why 3-2-1 is the largest common plan.