2-1 Buydown Calculator

What Is a 2-1 Buydown?

A 2-1 buydown is a financing arrangement that temporarily reduces your mortgage interest rate for the first two years of your loan. The rate is reduced by 2% in Year 1, 1% in Year 2, then steps up to your full note rate starting in Year 3 — where it stays fixed for the remaining life of the loan.

The "buydown cost" — the difference between what you'd pay at the full rate and what you actually pay during the reduced period — is typically paid upfront, most often by the seller or builder as a concession rather than by the buyer.

How the 2-1 Buydown Works Step by Step

• Year 1: Your interest rate is 2% below the note rate. You make lower monthly payments while the buydown fund (held in escrow) covers the difference each month.
• Year 2: Your rate rises to 1% below the note rate. Still lower than full price, and the escrow fund continues making up the difference.
• Year 3 and beyond: You pay the full note rate. From here it's a standard fixed-rate mortgage for the remaining term.

Who Pays for the 2-1 Buydown?

This is where Arizona buyers have a real advantage right now. The buydown cost can be paid by:

• The seller — in a negotiated purchase, many sellers are willing to pay buydown costs rather than reduce the sale price
• The builder — new construction in Queen Creek, Buckeye, Surprise, Maricopa, and other growth corridors is actively offering buydowns as incentives
• The lender — in some programs, lender credits can offset the buydown cost
• The buyer — least common, since the math usually doesn't favor this unless you plan to refinance within 2 years

2-1 Buydown vs. Permanent Rate Buydown (Points)

A permanent buydown (discount points) lowers your rate for the entire loan term — but costs significantly more upfront and takes years to break even. A 2-1 buydown gives you immediate monthly savings at a lower total cost, making it the better choice when someone else is paying for it and you expect to refinance if rates drop.