Mortgage Tools
Rate Buydown Calculator
See the mortgage savings from a 2-1, 1-0, or 3-2-1 temporary buydown, or from a permanent discount-point buydown, on your Florida mortgage. Every figure below is an educational estimate — your actual rate, APR, and costs require a full application and a conversation with me.
Loan Details
= 5.0% down
Enter a hypothetical rate for educational illustration only. This is not an offered rate, rate quote, or commitment to lend.
Buydown Offer
The most common structure: 2% below the note rate in year one, 1% below in year two. After the buydown period ends, the payment is based on the full note rate for the remaining life of the loan.
- Loan amount$380,000.00
- Payment at full note rate$2,496.33
- Year one payment$2,010.99
- Seller or builder credit needed$8,805.89
The credit needed is about 2.20% of the purchase price in this scenario.
Good Deal: A seller-paid 2-1 buydown costs you nothing out of pocket and saves you $5,824 in year one.
Year 1 Payment
$2,011
Rate: 4.875%
Full-Rate Payment
$2,496
Rate: 6.875%
Total Subsidy Cost
$8,806
Across all buydown years
Year 1 Savings
$5,824
vs full-rate payment
Year-by-Year Payment Schedule
| Year | Effective Rate | Monthly P&I | Annual Payment | Annual Savings |
|---|---|---|---|---|
| Year 1 | 4.875% | $2,010.99 | $24,132 | $5,824 |
| Year 2 | 5.875% | $2,247.84 | $26,974 | $2,982 |
| Year 3+ (full rate) | 6.875% | $2,496.33 | $29,956 | – |
Numbers are estimates of principal and interest only. Taxes, insurance, mortgage insurance, HOA, and CDD fees are not included.
Important: How a Temporary Buydown Works
A temporary buydown reduces the payment for a limited period; it does not change the permanent note rate. Qualification is generally based on the full note rate, subject to applicable loan program and underwriting requirements.
The calculations shown use the hypothetical note rate entered above to illustrate how a temporary buydown may affect estimated payments.
Estimated principal and interest only. Your total monthly housing payment may be higher and may include property taxes, homeowners insurance, mortgage insurance, HOA dues, and other applicable charges.
Educational Calculator Disclaimer
This calculator is provided for educational and illustrative purposes only. Any rates, payments, costs, or savings entered or displayed are hypothetical estimates and are not an offer to lend, a rate quote, or a commitment to provide financing. Actual interest rates, APRs, payments, costs, eligibility, and loan terms vary based on the borrower, property, loan program, market conditions, and other applicable factors.
What a temporary buydown is
Money is set aside in a separate buydown account at closing. Each month during the buydown period, that account covers the difference between your reduced payment and the full payment due at the note rate. Your loan itself never changes — only who pays part of the interest in the early years.
Who usually pays for it
In most Florida purchases the seller, a builder, or occasionally the lender funds the buydown as a closing-cost credit. Interested-party contributions are capped by program: conventional loans generally allow 3% to 9% depending on occupancy and down payment, and FHA generally allows up to 6%. Your purchase contract controls how the credit is applied.
Temporary buydown vs. discount points
A temporary buydown lowers your payment for one to three years only. Permanent discount points buy the rate down for the entire loan term. If you expect to keep the loan a long time, points may deliver more total savings; if you expect rates to fall or your income to rise, a temporary buydown can bridge the early years.
Qualifying and new construction
Lenders qualify you at the full note rate, so a buydown does not increase how much home you can buy. Builders in Central and South Florida often advertise buydowns as an incentive — we should compare the incentive against the base price, closing-cost credit, and any required use of their preferred lender before you decide.
Rate Buydown FAQ
What is a 2-1 buydown?
A temporary financing structure where a subsidy held in escrow lowers your note rate by 2% in year one and 1% in year two, before your payment returns to the permanent note rate in year three. The loan itself never changes — only who covers part of the interest in the early years.
Are temporary buydowns better than permanent buydowns?
It depends on your timeframe. Temporary buydowns give immediate payment relief in the early years and are usually funded entirely by the seller or builder, so there is often nothing out of your pocket. Permanent discount points lower the rate for the full term but require upfront cash and commonly take four to seven years to break even. If you expect to refinance or move within a few years, the temporary buydown usually makes more sense.
What does a 3-2-1 buydown cost?
Typically about 4% to 5% of the loan amount — roughly $16,000 to $20,000 on a $400,000 loan. Because conventional and FHA interested-party contribution caps generally run 3% to 6%, 3-2-1 buydowns are most often funded by new-construction builders offering large closing incentives.
What happens if I refinance during the buydown period?
You do not forfeit unspent money. Any funds left in the buydown escrow account are generally credited against your loan balance at payoff, reducing what is needed to satisfy the loan.
How much does one discount point lower my rate?
One discount point costs 1% of the loan amount — $4,000 on a $400,000 loan. Historically one point lowers the rate by roughly 0.25%, but lender rate sheets change daily and the actual reduction varies by program, credit profile, and loan size.
Are discount points tax-deductible?
On a primary-residence purchase, points are generally deductible in the year paid if you itemize under IRS guidelines. On a refinance they are typically spread over the life of the loan. This is general information, not tax advice — confirm your situation with your CPA or tax advisor.
Want to see whether a buydown or a lower price saves you more?
Let me compare a buydown against your other options using your actual scenario — no application required.
About the Author
Tanesha Tomlinson
Florida Mortgage Loan Advisor, Hometown Financial Group, LLC DBA Modus Mortgage
NMLS #1540854 · Company NMLS #1028232
Tanesha Tomlinson is a 24-year Florida mortgage industry expert who has originated over $100,000,000 in mortgages. She works with homebuyers, homeowners, and Realtor partners across South Florida, Broward County, Central Florida, and the Orlando area. Her focus is qualification, income calculation, loan programs, down payment assistance, and cash to close — explained plainly, with the numbers in front of you. As a licensed Florida Realtor® with United Realty Group, she also understands the property and contract side of the same purchase.
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Hometown Financial Group, LLC DBA Modus Mortgage · Company NMLS #1028232 · Tanesha Tomlinson NMLS #1540854 · Florida Real Estate License #SL3524613 (United Realty Group) · Equal Housing Lender. Licenses can be verified on NMLS Consumer Access and the Florida DBPR license portal. Content is educational only and is not a commitment to lend.
Last updated September 30, 2026
Information and tools on this website are educational only and should not be considered individualized financial, legal, or tax advice. Estimates are not a pre-approval, loan approval, or commitment to lend. Mortgage approval, rates, APRs, payments, taxes, insurance, closing costs, and loan terms are subject to borrower qualifications, property information, applicable loan-program requirements, and underwriting. This website disclaimer does not replace Modus Mortgage's official disclosures.
